Preamble

The House met at Eleven o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

BUSINESS OF THE HOUSE

The Parliamentary Secretary to the Treasury (Mr. Robert Mellish): With permission, Mr. Speaker, I should like to make a short statement.
The business on the Adjournment announced for Tuesday, 8th July 1975

Question accordingly agreed to.

Mr. Spearing: On a point of order, Mr. Deputy Speaker. The effect of the motion which the House has carried is that we have one-and-a-half hours for the shipbuilding debate and that it may proceed until at the latest 5·30 p.m. I have given notice to the Department of Industry of a matter which has been brought to my attention.
The explanatory memorandum on the shipbuilding Document R/1362/75 states that it provides for the elimination of shipbuilding subsidies by the end of 1975, but a report in the Business News section of The Times of yesterday by Mr. David Cross writing from Brussels states that
Under the terms of a new agreement in principle reached by officials to the Nine in Brussels, direct State aids to shipyards will continue at their present level until the end of 1977 at least.

is being arranged to allow for three debates, each of about two hours. The subjects will be the Sharman Group of newspapers, the plight of voluntary organizations, and arms sales.

BUSINESS OF THE HOUSE

Motion made and Question put:—
That, at this day's Sitting, proceedings on or relating to the proposed Motion (Aids to Shipbuilding), if not previously concluded, shall lapse one and a half hours after they have been entered upon, and may be proceeded with after Four o'clock, though opposed—[Mr. Harper.]

The House divided: Ayes 35, Noes 14.

Division No. 274.]
AYES
[11.07 a.m.


Barnett, Rt Hon Joel (Heywood)
Hughes, Rt Hon C (Anglesey)
Roper, John


Bishop, E. S.
Hughes, Mark (Durham)
Scott-Hopkins, James


Blenkinsop, Arthur
Hurd, Douglas
Shaw, Giles (Pudsey)


Buck, Antony
Johnson, James (Hull West)
Shaw, Michael (Scarborough)


Cunningham, G. (Islington S)
Kirk, Peter
Spicer, Jim (W Dorset)


Davies, Rt Hon J. (Knutsford)
Lamborn, Harry
Taylor, Mrs Ann (Bolton W)


de Freitas, Rt Hon Sir Geoffrey
Lawrence, Ivan
Watt, Hamish


English, Michael
Loyden, Eddie
Welsh, Andrew


Hamilton, W. W. (Central Fife)
Mellish, Rt Hon Robert
Woodall, Alec


Hardy, Peter
Mikardo, Ian



Harper, Joseph
Palmer, Arthur
TELLERS FOR THE AYES:


Harrison, Walter (Wakefield)
Prescott, John
Mr. Michael Cocks and


Henderson, Douglas
Radice, Giles
Mr. John Ellis.




NOES


Atkinson, Norman
Kilfedder, James
Thorpe, Rt Hon Jeremy (N Devon)


Brotherton, Michael
Lee, John
Winterton, Nicholas


Buchan, Norman
Pardoe, John



Flannery, Martin
Richardson, Miss Jo
TELLERS FOR THE NOES:


Howells, Geraint (Cardigan)
Skinner, Dennis
Mr. Clement Freud and


Jay, Rt Hon Douglas
Spearing, Nigel
Mr. David Penhaligon.

You will be aware, Mr. Deputy Speaker, that the House has been in difficulties because of EEC documents being outdated by subsequent events. If at 4 p.m. or before the Minister in charge comes to House and tells us that the document before us is out-dated, that will affect the time allocated for discussion of the document. The House may well wish to discuss the document in any case, but not necessarily in the time which is limited by the motion. May we have some guidance from the Government on their expectations in this matter?

Mr. Deputy Speaker (Mr. George Thomas): The House has taken its own decision on the timetable for today. We all know that Press reports are sometimes true and sometimes not, but we do not base our activities on Press reports, and I cannot rule on the basis of Press reports.

Mr. Buchan: Further to that point of order, Mr. Deputy Speaker, I have in my possession a longer version of the statement which was published yesterday in The Times. The same statement by the same writer was extended in The Scotsman yesterday. The article in The Scotsman makes clear that new rules were introduced partly because of pressure by Britain. It is, therefore, extremely important that a Minister from the Department of Industry should be here to say what is the new position and also to tell us that the Commission's document has been changed. I quote from The Scotsman:
At the insistence of the Italians a paragraph has been added to the Commission's text clarifying this point".
The point is that—

Mr. Deputy Speaker: Order. I am sorry to interrupt the hon. Member—

Mr. Buchan: It is an extremely important point.

Mr. Deputy Speaker: It is an important point, and I have already ruled on it. The fact that the hon. Gentleman is referring to The Scotsman rather than to The Times does not affect my ruling.
Immediately after the Clerk has read the Orders of the Day the hon. Gentleman may care to raise his point of order on the Orders of the Day when we turn to the subject.

Orders of the Day — SUPPLY

[23RD ALLOTTED DAY],—considered.

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Harper.]

Orders of the Day — EUROPEAN COMMUNITY (BUDGET)

Mr. Norman Buchan: Mr. Norman Buchan (Renfrewshire, West) rose—

Mr. Ian Mikardo: Mr. Ian Mikardo (Bethnal Green and Bow) rose—

Mr. Douglas Jay: Mr. Douglas Jay (Battersea, North) rose—

Mr. Deputy Speaker (Mr. George Thomas): A point of order—Mr. Buchan.

Mr. Buchan: On a point of order, Mr. Deputy Speaker. Although this will have to be a new point of order, I hope that I need not go over what I have already said. Document R /1362/75 makes clear that member Governments will continue to be free to nationalise shipyards. It is interesting that The Times should omit that point, but the important matter is that the nature of the document has been altered. Is it possible for us to take note, or even to refuse to take note, of a document which has been so drastically changed?

Mr. Deputy Speaker: As the hon. Gentleman is referring to the second debate that we are likely to have, he could well raise his point during that debate. At the moment he is taking the time of the House as regards the first debate. It is not possible for me to do other than follow the business that the House has decided upon.

Mr. Jay: Further to that point of order, Mr. Deputy Speaker. Although I realise that it is not possible for you to do anything about the matter, surely it is profoundly unsatisfactory that the House should be asked to debate a legislative instrument without knowing whether it is valid. Would it not be convenient for a Government spokesman—we have at least two present—to inform the House in advance what is the correct document


which we are expected to debate this afternoon?

Mr. John Davies: Further to that point of order, Mr. Deputy Speaker. It is well known to the House that many of the instruments emanating from the Commission are modified in the course of discussion within the Council's machinery. It may well be that this instrument is modified. However, the opportunity is given to the House to discuss an instrument as it is notified to the House, and the instrument before us is the one that has been notified to us. Surely it is possible for us to consider the instrument which has been notified to the House, considered by the Scrutiny Committee and tabled for debate.

Mr. Deputy Speaker: Order. In any case, this is not a matter for the Chair.

Mr. Mikardo: Mr. Mikardo rose—

Mr. Deputy Speaker: Order. I shall call the hon. Gentleman in a moment. Patience is a virtue on Fridays just as on any other day. It is not a matter for the Chair to decide the business of the House. The House has taken a decision.

Mr. Mikardo: Further to the point of order, Mr. Deputy Speaker. Would it not save a lot of time if my right hon. Friend the Patronage Secretary were to tell us whether we are to debate the document? Although it is technically possible, as the right hon. Member for Knutsford (Mr. Davies) has said, for us to discuss a document even after it has ceased to exist, that is not a sensible use of parliamentary time. Would it not be sensible for my right hon. Friend to say in the statement which I hope he will make that he will take the document away and table it for another day if he finds on his researches that it does exist?

Mr. James Kilfedder: Further to that point of order, Mr. Deputy Speaker. As the protector of the interests of Members, and particularly back benchers, will you ask the Government to do something about this matter? It is very inconvenient for many of us to stay here, and it may be that we shall be remaining here to debate a matter which is not effective. It makes us look silly if we debate something which has already been modified. Perhaps, Mr. Deputy Speaker, you might persuade the

Government to respond to the requests that have been made.

The Parliamentary Secretary to the Treasury (Mr. Robert Mellish): I give an undertaking to the House that contact is being made immediately with the Secretary of State for Industry. I hope very much that he will make a statement to allay the fears of hon. Members and explain the problems. I undertake to ensure that the views of the House will be conveyed to those responsible and that the Government will do what they can. I hope it is clearly understood, as the right hon. Member for Knutsford (Mr. Davies) has said, that this is a vehicle for a debate on general principle. I have no doubt that my right hon Friend at the first opportunity will explain and resolve any problems that might exist. There is a complication, and I shall try to get it sorted out as quickly as possible.

Mr. Buchan: I take it, Mr. Deputy Speaker, that my right hon. Friend has made a kind of statement. Presumably it is now appropriate to ask my right hon. Friend a question. I ask a simple question—namely, will a statement be made to the House at the earliest possible moment, even during the first debate which is to take place?

Mr. Mellish: I shall do my best to convey that view as well as the other views that have already been expressed. I am sure my hon. Friend takes the simple point that it does not seem very intelligent not to have a debate of any kind. If there is a document before the House which does not appear to be relevant, I can only say that I give an assurance that my right hon. Friend at the appropriate time—I assume before the debate actually starts—will make some explanation. I give an undertaking that I shall convey to the appropriate authority the views that have been expressed.

Mr. Deputy Speaker: That seems to clear up the matter.

11.26 a.m.

The Chief Secretary to the Treasury (Mr. Joel Barnett): I am glad to have this opportunity for a debate on the 1975 Community budget, the documents of which are before us, and all the associated documents relating to it.
The House will appreciate that the 1975 budget was adopted last December. It was published last February in the Community's Official Journal. Many of the other documents listed on the Order Paper deal with fairly technical matters but, as the Scrutiny Committee has pointed out in its various reports, some important points of principle underlie the technicalities. I shall confine my opening remarks to the major issues involved. With permission, I shall be happy in replying to the debate to deal with any particular points that are made on the documents.
First, I should like to say a few words about the nature of the Community budget. As hon. Members will know, the real control of the Community's expenditure is exercised not by the Budget Council of Ministers but earlier when the policies are formulated. For example, the Budget Council does not review the common agricultural policy. That is done by the Agricultural Ministers' Council. A similar situation applies for expenditure on the social fund, the regional development fund and so on.
Although control of the EEC budget, as with virtually everything else relating to public expenditure, comes back to me—as it has a habit of doing to Chief Secretaries—it does so under a different guise. It comes to me in this case as policy on expenditure on agriculture or on regional development, for example, which has been settled at other meetings of the Council of Ministers.
The Community budget is more like our own Annual Estimates. In deciding the size of the budget, we are agreeing in the Budget Council for a year ahead the cost of carrying out existing Community policies. Therefore, it is essential that the cost of Community policies are properly controlled. In one of its reports the Scrutiny Committee said:
effective control of all expenditure from Community funds is of paramount importance.
I could not agree more. Good financial control over the Community budget seems to have two essential elements. First, the growth of Community expenditure, both in total and in respect of individual programmes, should be properly planned and controlled. Secondly, once authorised, expenditure

should be properly spent for the purposes agreed by the budgetary authorities.
Before turning to methods of control of expenditure, I should say a word about the much exaggerated comments we read about the costs of running the EEC. Perhaps I might compare this expenditure with the cost of administration in the United Kingdom.
About 14 per cent. of United Kingdom Government expenditure—that is, about £4 billion out of £29 billion—goes on administration. That is widely defined as including pay, pensions, allowances, publicity and other matters. The comparable figure for the 1975 EEC budget is about 12 per cent.—namely, about £300 million out of a total of £2,500 million. I hope that that will put the matter in some perspective.
There are a number of ways in which the Community plans and controls the growth of Community expenditure. This year the Commission will be presenting in the preliminary draft budget documents forecasts of Community expenditure for 1976–78. I emphasise that these will be the Commission's forecasts and they will in no way commit the United Kingdom or any other member State. Nevertheless they will be a useful tool for planning the growth of Community expenditure in the medium term.
In the shorter term, the Budget Council's approach to the annual budgets helps to ensure that expenditure is kept under control. Last year the Budget Council took the view that as a general rule no expenditure should be included in the budget for policies still under discussion in the council. New policies agreed after the budget was adopted should be financed through supplementary budgets. This approach ensures that other Councils taking decisions involving expenditure from the Community budget should take these decisions in full knowledge of the expenditure consequences.
The prospect of a supplementary budget resulting from a policy decision implementing a new Community programme is a useful way of ensuring this discipline. The second element in good financial control is for expenditure, once authorised, to be spent for the purposes agreed. We rather take for granted in Britain that money voted by Parliament is spent for purposes for which it was


voted. We can do so only because we have well-established and well-proven audit procedures.
We are trying further to improve the Community's arrangements for audit and last year the Council of Ministers agreed that a Court of Auditors should be created to replace the present Audit Board. I hope that this will result in a more effective audit of Community expenditure.
One difficulty in this important area of financial control is that a substantial part of the budget is spent not by the Commission itself but by agencies in member States. This particularly applies to expenditure under the common agricultural policy. As the Scrutiny Committee recognised, it is up to each member State to ensure that operations financed by the CAP are carried out correctly to prevent irregularities and to recover sums lost because of irregularities or negligence.

Mr. John Lee: Will my right hon. Friend explain in what way the new audit system will ensure a more effective scrutiny of expenditure and the monitoring of irregularities?

Mr. Barnett: My hon. Friend intervened in my remarks a little too early. I was just coming to some other aspects of the problem.
Despite all precautions taken, I am afraid that there have been some widely-publicised frauds involving the CAP. One example, much publicised, concerned monetary compensation amounts—I apologise for the jargon and would explain that they are called MCAs for short—on a consignment of cattle from Ireland. The MCAs are applied on a weight basis so that if the weight of cattle imported into the United Kingdom from the Republic is over-declared, there will be a net overpayment.
A consignment of cattle was check-weighed on 20th January 1975 and it was found that the weight declared on the docket submitted for Customs and MCA purposes exceeded the true weight of the cattle by approximately 3 cwt per beast. Her Majesty's Customs' Investigation Division was called in and in the course of subsequent inquiries various check-weighing exercises were undertaken, which have shown that there has been a

tendency for some traders to over-declare weights on imports to the United Kingdom.
The Irish Republic Department of Agriculture has agreed to introduce a new form of weight docket backed up by supervision and controls in the auction marts and at weighbridges. The control measures will be supervised by the Irish authorities and it is expected that the revised system will be introduced later this month. In the meantime, the MCA refund payment on each claim has been limited to the amount due on an animal of 71 live cwt. The claimant is given an additional payment only if satisfactory evidence is submitted to the board that the actual weight was in excess of 7½ cwt. This arrangement will continue until the new system is in operation.
It might be useful to the House to have an example of the kind of situation which can arise. The House will want to know whether the cost of fraud will fall on the United Kingdom or on the EEC. Member States are required to recover sums lost as a result of irregularities or negligence and to repay sums recovered to the fund. In the absence of total recovery, the financial consequences of irregularities or negligence are borne by the Community with the exception of the consequences of irregularities or negligence attributable to the administrative authorities or other bodies of member States.
Alongside these examples of fraud, there are sometimes sweeping allegations made that the CAP is being defrauded of enormous sums each year. These are serious allegations, but I know of no evidence to suggest that there is any truth in them. The cases of actual alleged fraud in the 1973 Guarantee Section of the CAP involve 1·2 million units of account. This sum should be seen against total expenditure in this section of 3,700 million units of account.

Mr. Ivan Lawrence: Will the Minister say which court has jurisdiction over frauds committed in this way since the loser appears to be the Community?

Mr. Barnett: Frauds perpetrated in this country would come before the courts in this country. Clearly, anybody who commits a fraud in this country is liable to our laws.
I was trying to put in some kind of perspective the extent of frauds which understandably normally hit the headlines. I am trying to show why I believe that many of the reports have been seriously exaggerated. I hasten to add that we are all conscious of the need to take effective measures to prevent frauds, of whatever size.

Mr. Nigel Spearing: The Minister mentioned some figures, but in document R263/75, the Third Financial Report of the European Agricultural Guidance and Guarantee Fund, we see in Table 26 the figure of 11·7 million units of account as to detectable frauds, comprising 87 cases, and we also see that in 37 cases the money was recovered. Are those figures the same as the ones with which my right hon. Friend is dealing? Will he clarify the situation?

Mr. Barnett: Perhaps my hon. Friend was not listening with his customary assiduity. I was referring to the guarantee section, whereas he was referring to a different aspect of the matter. I do not dispute his figures, but I was dealing with 1973. If my hon. Friend is not clear about the situation, I shall be happy to look into the matter and mention it again later if I have a further opportunity to address the House.
The Commission has set up a special committee of inquiry to examine the possibility of fraud and irregularity in the management of Community funds and to propose measures to deal with them. The committee has produced reports which are before the House—namely documents R/3009/74 and R/419/75— on the milk products sector and the oil seeds and olive oil sectors. The Council and the Commission are now considering the follow-up to these reports and as a help the United Kingdom and Germany have prepared a draft resolution which seeks to encourage the adoption of the recommendations of the Committee on Frauds. Further reports are likely to be produced.
Everybody would agree that there is room for further improvement in financial controls over Community expenditure. But it would be wrong to ignore the progress which has been made in the past few years. Some of this improvement has been the result of pressure by

the member States, including the United Kingdom. The Commission has also introduced improvements, and I should like to pay tribute to the work of Commissioner Cheysson, the Commissioner responsible for the budget and financial control.
The 1975 budget was the first to be discussed under the provisions of the 1970 Luxembourg Budget Treaty. Under this treaty, for the first time, the European Assembly was given a greater rôle in budgetary matters. But this rôle of the Assembly remains a relatively small one. The Council had the final say over 85 per cent. of the 1975 budget as originally adopted. The Assembly had the final say over the remaining 15 per cent.
Under the 1970 Luxembourg Treaty, budget expenditure is classified as either "obligatory" or "non-obligatory". Again, I apologise for the jargon because these terms may not be well known to every hon. Member, but I am sure that they will become known to them over the years.
The Council had the final say over the former—the 85 per cent. I mentioned just now—and the Assembly had the final say over the latter, namely, the 15 per cent. mentioned a moment ago. Under these highly complicated arrangements the Assembly was able to increase non-obligatory expenditure by 53 million units of account—that is, £22 million. This sounds a lot, but in fact it was only 1 per cent. of total budgetary expenditure.
Of the £22 million, the Assembly devoted £14 million to raising the provisions in the budget for financing schemes under Article 5 of the European Social Fund. The House will no doubt be aware that we have done quite well from this fund. However, I fear that there is a further complication. The amount by which non-obligatory expenditure can be increased is, under the agreed rules, strictly limited.
At this stage, if the House will bear with me, I must introduce yet another piece of jargon—namely, the "maximum rate". That is the maximum rate by which non-obligatory expenditure can be raised. This has just been announced for the 1976 budget at 15·3 per cent. The announcement was made by the Commission. It arrived at this sum by performing, under the agreed drill, an


arithmetical calculation based on the average increase in community GNP and public expenditure totals.
I wish to say something about the opportunities for the House to discuss the Community budget. As the Scrutiny Committee has recognised, the present budget timetable makes it difficult for the House to consider the budget before the decisions are taken. I have asked the Community to consider bringing forward the date for the submission of the preliminary draft budget to the Council. There would then be an opportunity for a debate before the Summer Recess.
As a result, the Commission has put forward some helpful proposals which are now being discussed between the Council and the Assembly. We must await the outcome, but perhaps I might briefly add at this point that if the Commission's proposal runs into difficulties we should want to consider the interesting proposal in the recent report of the Select Committee on Procedure, for which I think the Committee is indebted to the hon. Member for Saffron Walden (Mr. Kirk).
The proposal was that the House might debate the budget for a particular year after 1st May when the Commission will have declared the maximum rate. I hope that this will be unnecessary and that my proposal to bring forward the date for submission of the preliminary draft budget itself will be accepted, and I am sure that the hon. Gentleman will accept it. If it is not accepted we shall have to consider other suggestions, including that of the hon. Member for Saffron Walden.

Mr. John Biggs-Davison: Will the maximum rate be modified simply on the basis of this arithmetical formula, on the authority of the Commission or on the authority of the Council of Ministers?

Mr. Barnett: The Commission will announce it on the basis of the arithmetical formula that I have announced to the House. The maximum rate is fixed on the basis of an arithmetical formula.
As I said at the outset, I welcome the debate. I believe that it is important for the House to be aware of the major issues involving the Community budget.

I hope that the debate can help in this process.

Mr. Lee: My right hon. Friend sounded as though he was about to sit down. I do not know whether this is wholly the most appropriate moment to deal with this matter, but I should like to catch my right hon. Friend's eye now rather than lose the opportunity later. We have heard suggestions about the revaluation of units of account which would involve our expenditure in United Kingdom terms being increased. Will my right hon. Friend tell us whether this is true?

Mr. Barnett: At present there is no question of a revision of the units of account, although I should explain to my hon. Friend that in the long term the way that the own resources system works, whatever the valuation of the units of account, would not affect any cost to us.

11.44 a.m.

Mr. Peter Kirk: As the Chief Secretary said, we are technically debating a budget which has been adopted and, indeed, has been in action for more than six months. It might seem a classic example of bolting the stable door after the horse has already left and gone a considerable way. This arises from the timetable considerations, which the right hon. Gentleman has just mentioned and to which I want to refer later. Nevertheless, particularly in view of the number of documents which the Government have put down for discussion today, I do not think that this is a waste of time.
This is the first real chance we have had of examining the Community budgetary system in any detail. It is of considerable importance that we should examine it before the process of drawing up the 1976 budget goes very much further down the road so that any views which hon. Members have to express can be taken into account by the right hon. Gentleman within the Budget Council, by the happily reinforced team of hon. Members from this House in the European Parliament and, indeed, by the Commission.
The object of this debate as I understand it is that we should range fairly widely over financial matters generally so that hon. Members may, if they wish,


indicate what priorities they think there should be in the 1976 budget.
The right hon. Gentleman indicated that this is not a budget in the sense that we should understand it in this country. This point has been made in the House before, but I think it is important to stress it again. We are really faced with expenditure estimates, in the terms that we know them, for one year only, although I welcome the right hon. Gentleman's statement that the Commission now has in mind putting forward possible estimates for two years ahead without binding itself any more than the British Government bind themselves when they produce their five-year rolling programme. We have been pressing for this in the European Parliament for some time in order that we can have some idea of the Commission's feeling about expenditure, especially non-obligatory expenditure, where the Commission is not so much bound by fixed rates as it is with obligatory expenditure.
We are looking forward to the possibility of a general discussion of this matter in the Budget Committee of the European Parliament with Commissioner Cheysson—I join the right hon. Gentleman in paying tribute to him for the work he has done—in about 10 days' time if that is convenient. In those circumstances it is, of course, a little difficult to embark on any analysis of the figures themselves. Indeed, the right hon. Gentleman rightly did not attempt to do so.
We can concentrate at this stage on only one or two aspects of the machinery and one or two aspects of the policies which put that machinery into action. I should like to devote some time to the fascinating and arcane subject of obligatory and non-obligatory expenditure, because it is highly relevant to the discussion on priorities.
Broadly speaking, if the system worked as its authors intended, the non-obligatory expenditure would be the expenditure on which the House could or should indicate its priorities, because obligatory expenditure tends to be fixed. Unfortunately, the right hon. Gentleman will recall that the authors of the Luxembourg Treaty of 1970, in their amendment to Article 203, thought of virtually everything except the most important thing—namely, what happens if the Coun-

cil and the European Parliament disagree about the classification of any piece of expenditure.
I consider that the definition of expenditure necessarily arising out of the treaty or acts performed under it is bad because it is uncertain as to what that would cover, to use a curious Irish phrase. For example, it could be argued that if the social fund is non-obligatory—nobody disputes that it is non-obligatory—at least the guidance section of the FEOGA should be non-obligatory expenditure as well. The guarantee section obviously cannot be because the prices having been laid down, the money must flow automatically from that. However, the guidance section is essentially policy money. If the Commission, the Council and the European Parliament agree that they want to concentrate their efforts in the guidance section in one area rather than another, they are free to do so in a way that they are not free to do under the guarantee section.
The right hon. Gentleman will recall the mild dispute between the European Parliament and the Council earlier this year about the classification of the regional fund. The confusion was indicated by the number of different explanations that we had from the Council in the course of our proceedings for insisting that it was obligatory, not non-obligatory, expenditure, at least for the first three years.
First we were told that it was because the European Council at its meeting last December had not only decided that there was to be a regional fund, but had even laid down the figures for the first three years and, therefore, the Council felt bound by this. We indicated that we did not believe that it bound us, but we were prepared to accept the figures provided the Council accepted our classification. That, of course, it refused to do, and it produced the ingenious theory that the fact that it was proceeding under Article 235 of the Treaty made it an act arising from the treaty and, therefore, it must be obligatory. We felt obliged to point out that this meant that all kinds of expenditure would be obligatory because all expenditure not specifically laid down in the treaty is taken under Article 235, as was the social fund.
We need to consider in rather more detail—perhaps my right hon. Friend the


Member for Knutsford (Mr. Davies) and his Committee might look into this matter—whether this distinction is necessary or viable and, if not, how it can be improved. Although we were able to agree the figures in this case, it has repercussions for next year. Although it is the maximum rate which restricts the amount by which the European Parliament can raise non-obligatory expenditure, the rate is applied to the previous year's non-obligatory expenditure. If we do not agree with the Council on what is obligatory expenditure and what is non-obligatory, we have, in effect, two maximum rates and this will affect the deliberations of the Parliament and Council for the 1976 budget.
I do not know whether the Council has found yet another ingenious formula to get round this problem. If so, perhaps the Minister can tell us when he replies to the debate. This is a matter of considerable importance and should be cleared up, especially if the Council is to indulge in a policy of supplementary budgets as the Minister suggested. I would regret this. It would be a retrograde step.
We were fairly clear 18 months ago that, as far as possible, there would not be supplementary budgets except in exceptional circumstances. This is a more sensible way of proceeding and would not be a lesser form of budgetary discipline than the policy put forward by the Minister.
We know that the Commission intends to press forward with five pilot schemes concerned with data processing, and there is no major objection to them by the Council. No money has been provided in the budget, so there will have to be a supplementary budget. This takes time and is highly complicated, and as it is non-obligatory expenditure it is liable to alter the maximum rate or the amount of "free space" for the Parliament for the following year. It would have been very much better if the schemes had been included in the 1975 budget, even if the money had not been spent. I hope that the budget Council will have second thoughts about constantly proceeding by means of supplementary budgets.
There have already been two supplementary budgets, one for the regional fund and one for the Cheysson fund—the

United Nations emergency fund—and it looks as if we shall have one for the data processing studies. All these will be coming forward at the same time when we shall be fully engaged in the budget for 1976. It would be very much better to concentrate as much as possible on the annual budget. We can keep a much greater policy element in the budget by doing it in this way.
There are two related matters to which the Minister did not refer but on which the House should begin to take a view. One is the considerable use of virement within the estimates and the other is the policy of carrying forward from one year to the next. My hon. Friend the Member for Scarborough (Mr. Shaw) probably knows more about carry-forwards than anyone else in the House and no doubt he will enlighten us if he catches your eye Mr. Speaker.
These carry-forwards represent one-third of the total budget—a considerable sum. It might be difficult to apply within the Community budget the same rule as we have in national Budgets that expenditure ceases at the end of a financial year, but with proportions of that size, there must be a cause for concern and we should look at this policy again. Perhaps the Chief Secretary will indicate the Government's thinking on this matter and any proposals they intend to put to the Budget Council.
The Minister referred to a better auditing procedure which will come into operation fairly soon. The draft treaty which sets up the audit court and gives further budgetary powers of control will, I am sure, be adopted by the European Parliament on Thursday, even though some Members have reservations on the budgetary powers.
In the Parliament, we intend to set up a public accounts committee to work as closely as possible with the audit court. The most important feature of the court is that it will have the power to make on-the-spot checks, which the present audit board finds difficult, and be able to send for persons and papers, including officials of national administrations. Until now, there has been considerable difficulty in controlling frauds where national administrations have been involved. Some national administrations are not as scrupulous in their approach to these matters as our own. This has left a gap in the


control mechanism which I feel confident the draft treaty will fill. Providing we can get people of the highest quality to staff the court—and I understand there is to be a further conference of national auditors at which our own Comptroller and Auditor General will attend or be represented, to discuss how this can best be achieved—we can begin to make progress towards a really effective method of control. This will be particularly necessary as Community expenditure rises and the regional fund comes into full operation.
The Minister was kind enough to refer to a suggestion I made to the Select Committee on Procedure for a debate to enable the House to give an early view on Budgets under consideration. We could do this on a motion to approve the maximum rate. It would not be very effective because the rate approves itself by means of an arithmetical calculation, but it would give the House an opportunity to express its view and to put down amendments on aspects of expenditure or budgetary control.
The Minister's suggestion of altering the timetable would be a much better method and, as far as I can make out from discussions with the Commission, presents no problem for it, although I do not know how the Council would regard the suggestion. A new timetable would enable us to receive the Commission's draft by 15th June and would alleviate the task of this House considerably. There could be a wide-ranging debate on the Commission's thinking for the following year. My suggestion was essentially a second-best solution which I regarded as the only one in the existing circumstances.
I make no apology for having been somewhat technical in my contribution for this is a highly technical matter. I am sure the debate will range much more widely than the subjects raised by the Minister and myself. I am delighted that we have at last got round to debating the budget, even if we are six months late, and I hope that the budget for 1976 will be handled slightly more expeditiously.

The Under-Secretary of State, Department of Industry (Mr. Gerald Kaufman): On a point of order Mr. Deputy Speaker. It may be for the assistance of the House if I seek to clarify a situation which

caused a little consternation at the beginning of our proceedings, namely, misgivings that if a report in The Times were accurate the debate planned for later today on the EEC directive on shipbuilding would be placed in a somewhat invidious and unnecessary light. The report in The Times is totally untrue. That being so, since the EEC directive will not be adopted until the House has had a chance to debate it, the debate on the EEC directive is utterly necessary. I hope that that clarifies the situation for the House.

Mr. Deputy Speaker (Mr. George Thomas): I am much obliged to the hon. Gentleman.

12 noon.

Mr. John Roper: I am very glad that we are having a debate not merely on the 1975 budget, of which at least half is economic history and, in spite of the unsatisfactory system of supplementary budgets, most of the remainder of which is already determined. What is important is that we are having an opportunity to discuss budget procedure in the European Communities. What is even more important is the way in which we in this House are able to become involved in the debate on the Community's budget.
I must begin by disagreeing with something that my hon. Friend the Chief Secretary said when he came before the Select Committee on European Secondary Legislation on 19th February. He said that the EEC Budget
is simply a technical way of forecasting expenditure arising out of the policy decisions taken elsewhere".
In one sense that is not true in view of the way in which the Budget debates go through both the Council of Ministers and the European Parliament. However, in another sense it is only a forecasting exercise which provides an opportunity to re-examine what has been decided before and to some extent to consider relative priorities between programmes. Therefore, although in a sense my right hon. Friend was perhaps right in saying that it was a technical exercise, it is none the less a very important one and a very important part of the development of the Community.
I have been critical of my right hon. Friend, but I now wish to congratulate


him and the British Government on taking such a strong initiative to ensure that R870/75, which we are considering, has been put forward by the Commission. By that I am referring to the proposals for a revised timetable. Clearly, as the hon. Member for Saffron Walden (Mr. Kirk) said, the procedure whereby we would get the first draft budget by 15th June would enable this House to have a debate, perhaps on the Floor of the House or perhaps in some other form, and that will have to be decided, on the budget proposals, before the House rose for the Summer Recess and before the Council of Ministers came to make its decisions.
There are, however, certain further complications about the budget timetable arising from a matter which has not yet been referred to in the debate. We are considering with R870/75, also R1543/75 which deals with the procedure for dealing with common agricultural policy expenditure, and in particular the information which the Commission will in future make available at an early stage about the expenditure on the CAP. It is unfortunate that to some extent the Commission's proposals on R1543/75 will negate what it has put forward in R870/75 in that, although we shall have some information about the aggregate sum which will go under the agricultural headings within the budget, and this is a very large proportion of the total—some 5/7ths of the total sum in recent years—when we consider the preliminary budget in June we shall not have any breakdown in the various chapters of the European Agricultural Guarantee and Guidance Fund. We shall have, according to the proposals put forward in R1543/75, only the aggregate "envelope" of the total expenditure, and the individual chapters and headings for different commodities will become available only considerably later in the year. This is a serious matter because of the very substantial changes in expenditure under the different chapters from year to year.
The hon. Member for Derbyshire, West (Mr. Scott-Hopkins) will know that there was more than a doubling of wine expenditure between 1974 and 1975. It increased from 41·1 million units of account to about 99·2 million units of account. Under the beef and veal chapter of the guarantee fund the increase

between the two years was even more—a substantial increase from 20·5 million units of account to an estimated 395 million units of account in 1975. This vast increase will be hidden within the envelope figure for the EAGGF which is all we shall have when we consider the draft budget on 15th June.
Therefore I ask the Government, particularly the Ministers who will consider these instruments in the Council of Ministers, to consider whether some alterations should not be made to the proposals in R1543/75 to ensure that the discussion we have on the preliminary budget between June and the time the House rises, as put forward in R870/75, will be a meaningful discussion with significant figures for each of the chapters within the agricultural item. This is a matter of some importance, because otherwise what is being given on the one hand appears likely to be taken away on the other.
My right hon. Friend the Chief Secretary said in his closing remarks something which may be interesting and academically correct, that when we go over to resources propres—own resources—the value of units of account becomes meaningless. We are, however, slowly moving away from going over to resources propres and therefore the question of units of account assumes somewhat greater importance. Here, of course, one is concerned as to the impact that that might have upon our budgetary contribution. We are extremely fortunate in respect of the present value of the unit of account, but regular readers of the Official Journal of the Communities will know very well that virtually each day there is a new and rising value of the unit of account as it is used for the new European Development Fund and within the European Investment Bank. I have been unable to check the value this morning. The last time I looked one unit was worth about 58p. That is considerably more than the value allowed for at present in budgetary matters.
We have been fortunate up to now that our Community partners have been able to turn a blind eye in this direction, but it may be, particularly if the Ministry of Agriculture is less enthusiastic about monetary compensation amounts, that in the next few months the value of the unit of account for a number


of purposes will have to be changed. That would have a very serious implication for the other side of the budget which has not been referred to today, not merely on the expenditure of money but on the contributions which will have to be made.
Although my right hon. Friend indicated that the question of units of account was not under discussion at the moment, I shall be glad of some indication whether he will be able to prevent it being discussed for the rest of this year.
I do not want to follow the hon. Member for Saffron Walden into the high theology of the discussion about obligatory and non-obligatory budget items. I shall leave that to my hon. Friends who are going to the European Parliament, who will be able to join the hon. Gentleman in that high theology. They seem to have left already.
It is, I believe, more important to give the European Parliament legislative powers than to give it some of these rather curious sops of certain powers over the budget, which the Council frustrates whenever it tries to exercise them. But that matter takes us far beyond the scope of today's debate. It is one to which we shall no doubt return.
I think that my right hon. Friend said that supplementary budgets were a good thing because they forced Ministers in the other Councils to realise the financial implications of what they were doing. Ministers should always be made to realise the financial implications of what they are doing, but I rather agree with the hon. Member for Saffron Walden, in that I do not find the system of a series of supplementary budgets during the year at all satisfactory. If, as I believe, in the present development of the Community the budget is important—and here I disagree with what my right hon. Friend told the Select Committee—it should be the occasion on which relative priorities across the board can be considered. The use of token items or pro memoria items seems to me an unsatisfactory way of looking at the relative priorities of the Community.
I understand that we may have as many as five supplementary budgets during 1975. If the number increases each year—perhaps five in 1975 and then six in 1976—that is not good budgeting.

It seems to me to be rather unsatisfactory.
Reference has been made, on a further technical point, to the problem of transfers between chapters and the problem of carry-forwards. Here we are moving into an area in which public accounting procedures are very different from those in this country. However, we should be given some information about what will happen with regard to carry-forwards once the Community moves to resources propres. Whereas at present presumably one does not call for contributions until money is expended, once one comes to the resources propres, an automatic transfer arrangement, there will presumably be considerable balances equivalent to carry-forwards building up in the Community's funds. Attention should be given to this matter.
The arrangements for transfers between chapters, so long as they are approved by the Council of Ministers, does not seem to me to be totally unsatisfactory, although the European Parliament may find it a device whereby Ministers can conveniently avoid their responsibility for consulting Parliament. But the carry-forward procedure, particularly as it affects the agricultural fund, and as it may affect the regional fund, is something that we must examine much more carefully, although the Committee on European Secondary Legislation and the House will be grateful to the Government for the helpful memorandum they have provided on the problem, because it has led us a long way, if not as far as the hon. Member for Scarborough has gone, towards understanding the intricacies of this rather difficult problem.
While comparing what has happened with what is proposed, I should like to ask my right hon. Friend to consider one further matter related to the point he mentioned about providing multi-annual forecasts of expenditure. I recently looked at the formal record of the budget for the current year, where we are given the figures for expenditure in 1973 and appropriations in 1974 and 1975. In the same way as in our own White Paper we have forecast and out-turn information, it would be very helpful if, for example, in those years' budgets we could have information on not merely the expenditure in 1974 but the allocation or the estimates for 1974, so that we might


have an opportunity to compare estimates or allocations and expenditure or out-turn. At present, without getting a number of different documents together, and then perhaps having to make adjustments, hon. Members and others cannot see how far the Community kept within its budgets. I hope that my right hon. Friend and his colleagues in the Council of Finance Ministers will consider the matter.
I referred earlier to the way in which the House can consider and comment upon the effectiveness of the budget. Clearly, the Scrutiny Committee as at present composed can look at the budget and refer it to the House only if it thinks that it is important, which I am sure that it always will. But probably in our discussions on the report of the Select Committee on Procedure we shall need to consider whether a half-day debate such as this is a totally satisfactory way to discuss in detail the estimates and the proposals in the budget. Perhaps a Standing Committee or an ad hoc Select Committee would be the appropriate way to enable the House to give detailed consideration to the budgetary proposals.
The Sunday Times drew attention last Sunday to a matter which is perhaps of some importance, because it shows the link between the Community's budget and our domestic budget. I refer to the way in which the Treasury has been able to reimburse itself from certain social expenditures by clawing back funds from the Community. I do not wish to develop that point in detail today, but there are considerable implications for the regional fund. I understand that when the rules for that fund were being drawn up it was made clear that it was to provide additional resources for regional development. I hope that my right hon. Friend will be able to give an assurance that the gross sum to be made available to the United Kingdom in the next three years can be used for additional regional projects, and that it will not be used as we fear, and as we learn from the Sunday Times may have occurred in the case of the social fund, to reimburse certain expenditure which the Treasury had always intended to carry out.

Mr. Russell Johnston: As the hon. Gentleman is on the subject of the potential clawback of the regional fund and the alleged clawback of the

social fund, would he care to say anything about the extreme difficulty of monitoring this matter, which we have discussed at length in the Regional Committee of the European Parliament? National Governments' budgets for regional and social policy fluctuate. Therefore, a dip which coincidentally equates with the amount of money received from Community funds would be very difficult to nail. Has the hon. Gentleman thought about monitoring procedures?

Mr. Roper: I am grateful to the hon. Gentleman for asking me to comment on something to which I have not given a great deal of thought. Clearly, he has given it a great deal more. I am anxious to have an assurance from my right hon. Friend that the Government and the Treasury will not use the resources that they are likely to receive from the regional fund in order to make savings in other forms of expenditure. The idea of the regional fund as I understand it—the hon. Gentleman will know more about it, having followed the matter in the European Parliament—was to provide additional resources for regional expenditure. It would be a considerable disappointment to those of us who come from the regions, as well as those who wish to see the regional fund as an important part of the development of the European Community, if this were used merely as a means of saving the United Kingdom Treasury a small amount.
I have tried to cover a number of points of substance and procedure in the way in which this House and the European Communities consider their budgetary exercise. It is a matter of considerable importance. We are feeling our way. But it is of value that the Government have provided, at least on this occasion, rather more time than on some other occasions to enable the House to debate it.

12.20 p.m.

Mr. James Scott-Hopkins: The hon. Member for Farnworth (Mr. Roper) raised two or three important points in the early part of his speech. One concerned the value of the unit of account. I do not wish to pursue this matter very far, but I hope that the Chief Secretary will take note of what the hon. Gentleman said, not only in relation to the


value of the unit of account but also in relation to the value of the green pound, which is extremely important for the farming community, the level of MCAs and the subsidies received by the farming community and consumers. I hope that in his reply, the Chief Secretary will indicate that the Treasury has in mind a review and that this will be raised with the Council of Ministers, together with the value of the unit of account and the green pound.
The hon. Member for Farnworth referred to the FEOGA fund, and the level of expenditure as at 15th June. There is a difference between the guidance section and the guarantee section. As always, Ministers and officials are extremely reluctant to break down the estimates to the smallest detail. I hope that this will be reviewed because so much has happened between the time of making the estimates and the estimates coming forward. It is difficult to get more than a rough guide between the various sections.
The Chief Secretary said that the level of fraud in the agricultural sector of the Community expenditure was not as great as was thought. However, this matter is important. The hon. Member for Newham, South (Mr. Spearing) spoke of the level of fraud in 1970 and 1975 in the milk sector. The amount of fraud in the olive oil sector in 1973 was 20 per cent. The Committee of Investigation discovered that 20 per cent. of the moneys devoted to that sector was improperly applied. In the overall picture of total expenditure of Community or FEOGA funds, a small percentage—about 1 per cent.—is known to have been fraudulently applied.
I welcome the right hon. Gentleman's support for the setting up of a court of audit. This is extremely important and the sooner it is in operation the better. Physical checks—the present practice—are all very well to a limited extent but the off-sampling and physical checking at frontiers, of cattle travelling between Eire and this country, for example, can be carried out only to a limited extent. There must be a complete audit check to overcome this problem.
There are one or two more difficulties with which I hope the right hon. Gentle-

man will deal in his reply. One of the problems at present is the absence of an offence for this type of fraud in some national legislation. If someone is operating fraudulently against his national law, that is taken care of, but if it is against Community Law there are loopholes. The Council of Ministers must deal with this, and I hope that the right hon. Gentleman will draw this to the council's attention.
The point was raised about the territorial basis of legal jurisdiction. Many products travel across three or four frontiers and fraud may occur at two of the four frontiers. Under national legislation, there is the absence of penalties as well as the absence of such an offence.

Mr. Lee: We cannot expect to have an effective control unless a common law of fraud is applied to all parts of the country.

Mr. James Scott-Hopkins: I accept that. The hon. Gentleman is ahead of me. It will take time and, as I am not a legal expert, I do not know the complications involved. Difficulty has arisen because goods have been routed outside the Community and then come back inside it. These multi-transactions give rise to difficulties.
The point has been raised in relation to the situation where no offence exists in national legislation or where the last operator was acting in good faith and did not realise that a fraud had been committed at an earlier stage. However, he would be involved and would be legally liable.
I hope that the right hon. Gentleman will bear these matters in mind in the coming months. It is important that we get this right. It is very easy, if someone is bent on perpetrating fraud in relation to Community funds, to find loopholes. The number of loopholes is very small in total. The first and most important action to be taken is the setting up of a court of audit. Secondly, there must be a review of existing legislation so that the loopholes are closed.
We know that there has been fraud in the olive oil and the milk sectors. I am delighted to tell the hon. Member for Farnworth (Mr. Roper) that the special committee of inquiry, which has done an extremely good job in these two areas, has been given a mandate by the Council


of Ministers to examine, at the same level of intensity, the beef and wine sectors. I hope that no fraudulent practices will be discovered there.
Although we have a long way to go, we are moving in the right direction and are dealing with this tiresome but, in financial terms enormously large, question of fraud which is bedevilling that sector of Community funds.

12.27 p.m.

Mr. Nigel Spearing: As one who had some doubts about whether we should become members of the European Economic Community, it would be right for me to draw attention to the extent to which we have or do not have control over the funds, which the British public contribute to the EEC.
During the debate we had in this House—and outside—on this matter, people came to me and said, "You are not at all interested in the subject we are discussing, so why do you harp on procedure?" I have always said that we have to be quite sure that we get procedural matters right. In designing an aircraft, for instance, people can argue about the shape of the wing or the size of the fuselage but if there is no effective control system for the aircraft, the arguments about matters of design are less important.
The budget is a vital instrument of control. Anyone who has listened to this debate will come to the conclusion that in relation to this matter not a great deal of control is vested in this House. This is not surprising, because the subject was first debated on 19th December. It was tabled for debate on an Adjournment motion, together with the six-monthly White Paper on Developments in the EEC. At the beginning of the debate in December, the Lord President of the Council on a point of order was quite prepared for this matter to be discussed then. It was only because there was no time that this was not discussed, and that is why we are discussing it this morning.
The motion then and now was on the Adjournment of the House. That is an inappropriate motion. I know that these matters are now history and that we are discussing something which has happened, on which the Council has taken

decisions. That does not mean that we should not take note of them.
I would have thought that a "take note" motion would have been the most appropriate in the circumstances. I asked the Lord President what his policy was concerning motions on European matters and he replied:
In accordance with the views expressed in the Report of the Select Committee on Procedure, the Government will continue to table motions suitable to the subject matter concerned."—[Official Report, 19th June, 1975; Vol. 893, c. 499.]
In its proceedings the Select Commitee makes it plain that a motion on the Adjournment is not satisfactory. Paragraph 24 says:
Such a Resolution is therefore the most important step in the House's influence over European secondary legislation.
Paragraph 25 says:
It is, in their opinion, essential for the House to be able to come to a formal decision".
I said that a "take note" motion would not have been inappropriate today. I am sorry that the Government did not table such a motion. Had any Member wished to draw attention to a particular matter he could have done so by tabling an amendment to the motion. Because we have a motion for the Adjournment of the House, that is not possible. I hope that this is the last time on which the House will discuss vital matters of EEC expenditure on such a motion.
I turn to the matter in hand. The Chief Secretary did not give any figures. This is extraordinary because we are discussing the expenditure of £3,000 million worth of public money. Nor did the Minister mention that as time goes on there are plans for changing the way in which this money is to be raised. The "own resources' system means a change from contributions by existing Member States and direct contributions by this country to a system whereby the Community levies its own taxes and the money goes direct to Brussels with the result that there will be even less control by this House than there is supposed to be now.
The Minister, and I apologise for interrupting him earlier, gave me some figures about auditing. I have checked those figures and I find that I am wrong. The figures that I read out were for


three years and not for the last year. It is salutary to observe that £8·5 million of the £11 million was incurred in 1971. The fact that the amounts have been reduced since then and the total number of places recorded is perhaps indicative of the fact that the system is beginning to bite.
I ask my right hon. Friend in replying to tell us whether this auditing procedure can be reinforced by the Public Accounts Committee, the Expenditure Committee and perhaps the Comptroller and Auditor General. How can the customary procedures of auditing public moneys in this country be extended into the EEC? Our 12 per cent. to 13 per cent. contribution to the Community Budget flows into the total and we might have hoped that the Community officials would have said to our people in Whitehall who undertake these checks, "Come in, the floor is yours. Have a look at the total expenditure, as you would in the United Kingdom."
This is important because so many of these payments are bulk payments to firms or individuals for such things as storage and transport when paper fraud is not too difficult. We have all heard stories of taking butter to the Vatican and that sort of thing. I hope that my right hon. Friend can assure us that the customary United Kingdom procedures can be extended at will into the EEC of which we are now a full and, apparently for the time being at least, a permanent member.
I turn now to some of the moneys involved. It is difficult in these debates to get hold of some of the figures. If we had held the debate on 19th December we would have had to rely on 11½ lbs. of duplicated documents—not an easy method of ascertaining figures. As my hon. Friend the Member for Farnworth (Mr. Roper) has pointed out, if we had to rely on that we would not have been able to look at particular headings under the Agricultural Guidance and Guarantee Fund.
I remind the House of the tremendous sums spent here, five-sevenths, of the total of EEC expenditure. The expenditure is now given in this Official Journal dated 28th February. Some of the sums

are enormous. Under the guarantee section there are 1,500 million units of account for milk and milk products the equivalent of £700 million. There were 166 million units of account on tobacco for 1975, which I understand from the Treasury is about £70 million. The EEC is contributing that amount of money to support tobacco. Under the heading:
Accession compensatory amounts granted in respect of intra-Community trade
there are 248 million units of account, or £100 million. I suppose that we benefited from this temporarily during the accession period. Another heading is:
Expenditure due to the monetary situation.
That is a nice heading, not very exact. Under that heading there are 105 million units of account, or just over £50 million.
These are large sums. I draw the attention of the House to some of them because many people would be unhappy at the way some of these amounts are expended. I begin with tobacco. I was shocked to see that we support tobacco growing in Europe. If people wish to buy tobacco and pay the taxes, that is up to them. But to have £12 million of taxpayers' money going from the United Kingdom to support tobacco growing in the Community seems to be remarkable, particularly when some of it goes to support the storage of tobacco from one year to the next.
I hope that my right hon. Friend will draw this to the attention of the appropriate minister. I hardly think that it will be the Minister of Agriculture, Fisheries and Food—but it probably is. Perhaps my right hon. Friend will discover what is to be the Government's attitude to such expenditure. The Agricultural Guidance and Guarantee Fund, as I understand it, is designed to improve the efficiency of European agriculture. We are spending £12 million on tobacco growing. That is a vastly greater sum than we are spending on health education and on discouraging smoking. We have to spend money on the Health Service to maintain hospital wards full of people with lung cancer. I have seen that and I do not like it.

Mr. Douglas Jay: Can my hon. Friend tell us in which country in Europe this tobacco is grown?

Mr. Spearing: In a Written Answer of 10th March the then Minister told me:
The main producers of tobacco in the EEC are Italy and France, while some is grown in Germany and a little in Belgium. A full account of the Community's common agricultural policy for tobacco is contained in 'The Common Agricultural Policy' published by the Commission, August 1972 and the Annual Report on Agriculture 1973 COM (73) 1850 Final—1974 Edition available shortly—gives an account of the operation of the system during that year."—[Official Report, 10th March 1975; Vol. 887, c. 64.]
I assume that if my right hon. Friend wishes to look that up, or if any member of the public wishes to do so, it will be available. Where it will be found in the United Kingdom I am not sure.
I turn now to the activities of the Intervention Board in this country. This was referred to in our debates on the Community because we had the first report of the Intervention Board for Agricultural Produce for the calendar year 1974, Command 6033 published in April last. Many hon. Members were shocked to see in the accounts at Table K that the United Kingdom Intervention Board paid £14,861,000 on production subsidies on cereals used for starch.
I asked a Question about this on 6th May 1975, and the Minister of State for Agriculture, Fisheries and Food gave some particulars about the way in which this money was spent. It was to assist in the production of maize and wheat and in the production of starch. I asked to whom these sums were paid, and the reply was that this is paid by the United Kingdom Agricultural Intervention Board to firms in this country.
It is not normal practice to publish detailed information relating to bodies or persons to whom payment of subsidies is made."—[Official Report, 6th May 1975; Vol. 891, c. 423.]
I understand that that is directly contrary to what happens to moneys which are made available to Parliament for the United Kingdom Government to spend. I checked that with the Treasury, and the position is that any moneys paid to individuals or persons by way of subsidy must be published. As far as I know, that is the practice. But the United Kingdom Intervention Board—despite the Royal Arms and the fact of this being a Command Paper to Parliament—is not expending money voted by this House

but in the European Agricultural Guidance and Guarantee Fund.
I hope that, when he replies, my right hon. Friend the Minister, if he cannot clarify this matter entirely, will at least give us an assurance that Her Majesty's Government will make representations, so that where moneys are expended in this country—heaven knows what happens in other countries—we know at least to what individuals and firms these subsicies are paid. A sum of £40 million to convert animal or human food into starch, paid in this country in 1974, is not a minor matter, and I hope that my hon. Friend will give us some assurances on this.
I now turn to the third matter of expenditure, which is of even greater substance and significance—the expenditure on milk. We know that the bulk of the expenditure of the Guarantee Fund—not half of it but a good proportion of it—goes on the support of dairy produce, and I quoted from the budget the £700 million for this current year.
We also know that there are considerable quantities of surplus milk in Europe. As far as I understand the position, the Milk Marketing Board in this country has managed to organise our dairy industry—perhaps we have an advantageous climate—with relative efficiency, and without needing these vast amounts of public money to keep it going. Apparently this is not the case within the Community. But we have these large amounts of skimmed milk powder available. Some of it, the House will know, goes abroad, and I ask my right hon. Friend, the then Minister for Overeas Development, on 8th May 1975,
… what provision had been made by the EEC in providing Third World nations with shipments of milk, and whether any part of these shipments are used for the supply of commercially marketed baby foods in any of the countries concerned.
I asked this because it is a well-known fact among aid circles in this country, brought to the attention of the public by the magazine New Internationalist, that in certain Third World countries there are very considerable commercial pressures on people to buy powdered milk and to use it as a substitute for breast milk for babies, and that many babies and many mothers have had difficulties over this, because the tendency is to use less


powdered milk than is necessary, resulting in a very weak milk mixture which is far inferior to natural breast feeding. Even worse is the use of feeding bottles, where sterilisation problems, particularly in the tropics, are very acute.
I was shocked at my right hon. Friend's reply. She said:
The Community's 1974 programme allocated 55,000 metric tons of skimmed between 19 countries and organisations, at an estimated value of about £17 million. My Ministry is urgently seeking details of the milk powder sent to Third World nations in 1974 from this and earlier EEC programmes. … The Community primarily provides the milk for recombination into whole fat, milk for needy urban areas—as in India's Operation Dairy Flood—or for properly supervised use by international organisations. In a few cases where recipient countries intend to sell the milk powder locally, the Community is seeking guarantees prior to supply that it will not be marketed in ways that might result in its unsupervised use as artificial baby food."—[Official Report, 8th May, 1975; Vol. 891, c. 520.]
I emphasise the phrase that
the Community is seeking guarantees",
which clearly implies that, at the time when this food aid was provided, no guarantees were built into the system at all.
Further inquiries elicit that the position to date is not very satisfactory, because the European Parliament Working Document 19/75 of 7th April 1975 on a proposal
for a regulation on establishing general rules concerning the supply of skimmed milk powder as food aid to certain developing countries",
makes it quite clear that some of the distributions of the milk can be requested by the countries concerned. It speaks of
free distribution to certain sections of the population … for sale on the local market, with development projects being financed from the proceeds…".
In other words, the EEC provides this powdered milk at very low rates, and it is re-sold on the local market commercially, with the idea that the proceeds can then be devoted to local development projects.
I view this whole matter with the greatest distaste. It seems to be the case that not only are we importing food or using food in Europe for dairy purposes, to which I take no objection, although it may be rather heavy on grain

supplies, but accumulating vast surpluses of skimmed milk, some of which is sent abroad to Third World nations. People say what good boys the EEC are in this respect, but there are no safeguards to stop its being used in the commercial ways that I have described—a well-known scandal in aid circles.
I hope that my right hon. Friend, when he winds up the debate, will give some assurances that in this matter Her Majesty's Government will not merely make inquiries, or ask the EEC to seek to ensure that this does not happen, but will get the EEC to stop it. I do not think that anything less would be worthy of this Government or of the United Kingdom or, indeed, of the EEC itself.
I have ranged rather widely on EEC expenditure, all in relation to agriculture, and mentioned three matters which are clearly very unsatisfactory. It would have been possible for any Member to look into any matter concerning EEC expenditure in this debate. As I understand it, we have a situation in which we have a budget matter, a Consolidated Fund matter and a Supply matter all rolled into one. That is the functional position this morning, and the Government have not given hon. Members the sort of opportunity they require to discuss this matter, as they would, for example, under the Finance Bill. I hope they will do so in future.
I hope that this debate will at least prove that we have virtually no control over this situation. Control in the political sense is control of expenditure. That is why this House came into being, and it is why some Members in matters of control, had doubts about membership of the EEC, and still have them.
The Government should make sure that when we debate the draft general budget for the second time—this may not be possible before the Summer recess and it may have to be in October—better arrangements are made. We ought to be debating this subject not on a very loose motion for the Adjournment but on a motion which is amendable, and in regard to which amendments can be put down, if not selected.
Secondly, I hope that many of my hon. Friends will peruse these volumes with care, and raise matters concerning the expenditure of public moneys in the EEC.


That is where the power of this House lies, and if the power of this House is to continue in these matters, that is what should happen.

12.49 p.m.

Mr. Michael Shaw: I shall comment on the speech of the hon. Member for Newham, South (Mr. Spearing) only in so far as he touched on the desirability, in his view, of the customary procedures of this House being applied to the Common Market. I must voice my disagreement with his views, because believe that we are seeking to do quite the opposite—namely, to build up the supervisory court of auditors and other procedures so that the Common Market, out of its own experience, can build up an adequate and firm control over its own expenditure. I believe that in the long term that is the fruitful way of developing this new institution rather than trying to impose ties and controls from this House. Clearly, if every country were to seek to impose ties and controls, that would lead to absolute disaster. We are seeking to create growth and success in the enterprise of the Common Market rather than to hold it back.

Mr. Jay: That may well be so, but I think that the hon. Gentleman will agree that we have constantly been assured by the Government and others, as the public have been assured, that through the Scrutiny Committee procedure of this House and, subsequently, debates here, there was a reality in British control over some of these matters at any rate. Surely the hon. Gentleman is not denying that.

Mr. Shaw: That is perfectly true, but none the less I think that the real way forward must be to build up the audit procedures in the Community itself rather than to apply them here. It is true that the powers we have here and Committees here ought to investigate expenditures and any matter they wish in relation to the Common Market, because they seek to bring forward the information for us to comment on it and, if necessary, to take decisions on it. But that leads to another matter entirely.
I should like to comment on some of the remarks of the hon. Member for Farnworth (Mr. Roper). His speech was very helpful indeed. It showed a great

understanding of the problems we are facing in the Budget Committee and in Parliament itself in Europe. I would hope that the informed and interested commentary that he gave would be, as it were, a reflection of the general interest that the House could give to the procedures as they develop in the Common Market. We must be very grateful for the fact that such informed opinion is taken by the hon. Member and his colleagues on these matters.
However, I want to take up the point concerning the hon. Gentleman's reservations about the new procedure in relation to the EAGGF. The procedure must be a compromise. The hon. Gentleman was very properly voicing some of the reservations he sees in the compromise, but he went on to say that he could not support a proliferation of supplementary budgets. I would agree with him on that. There is a danger in having more than the absolute minimum of supplementary budgets. We have, therefore, to accept a compromise. Either we delay our consideration of the details of the EAGGF so that at a later date they can be inserted with considerable accuracy and, by so doing, save a supplementary budget or perhaps more than one such budget, or we have to look at a much more generalised figure earlier in the year.
The hon. Gentleman is right to point out his views, but the solution put forward by the proposal for a later inclusion of the details is one that we ought to try.

Mr. Roper: Quite clearly, what one has to strive for here is a compromise. What I was suggesting was that the balance might not have been struck in quite the right way and that it might have been better at the earlier stage, 15th June, to have some first estimates, although obviously later crop information and information about the development of different commodities would mean a need for subsequent modification to the chapters before the initial budget was finally adopted. However, in the present situation I think that we ought to have more information, albeit preliminary, at the first stage.

Mr. Shaw: I fully take that point. I hope that the hon. Gentleman's remarks


will be borne in mind in seeing whether that is possible.
We all welcome the chance of this debate. Because of the time lag which has been mentioned, it is right that we should accept that this debate is really about budgetary procedure and the problems we are finding as the sums involved and the authority of Parliament in Europe are changing, how these evolve and how we are to meet our new responsibilities. That is exactly the way in which the debate has been going.
I have always been conscious, ever since I went into the Assembly, that we should remember that the EEC is a new and developing organisation, and so, too, are its institutions.
As regards the budgetary procedure, we have only just—last year—moved out of the interim period and into the new procedure. I have never thought it was possible that the new procedure would be found to be exactly right in our circumstances from the moment it began to operate. We have had to learn by experience. After all, when we consider the time it has taken for our own systems in Britain and others to evolve, how can we be surprised at the fact that amendments to the system are required in the light of experience in the Common Market? It is natural and, I believe, healthy.
Concerning the European Parliament, clearly we must accept that in the initial years it was very largely nothing more than a talking shop. It has been criticised—although I believe too heavily—on that score. One of the first duties of any parliament is to act as a talking shop. None the less, as the Parliament has evolved, so gradually it has shown that it is capable of taking on more powers and more importance. Indeed, this was the real battle behind the setting up of the regional fund. It was not the fact that there were any differences as to whether it should be set up. The real battle was as to who would have the final say, the Council of Ministers or the European Parliament.
I take great hope for the future from the fact that the difficulty was resolved by what I may call a truly British-type compromise, and—this is the important point—the future authority of Parliament was upheld, because eventually the final

say will be, as has been accepted, with the Parliament.
Perhaps I could deal now with two remaining points, the first being about the timetable for the budget. I have been through only one year's budgetary experience. I found that there was a quite inadequate time scale in the Parliament to discuss the draft budget when it came before Parliament. Therefore, I very much welcome the suggestion put forward by M. Cheysson for lengthening the time in which we could discuss that budget. The extra time will be very valuable and will give our discussion a good deal more meaning. It imposes a problem, however. There must be finalisation of departmental expenditure two months earlier than at present. Nevertheless I believe that this is a worthwhile suggestion, which I hope will be accepted.
In the United Kingdom taxation and fiscal systems there is no method of carrying forward appropriations from one year to another such as exists in many other countries. In spite of the drawbacks, I believe that the system is necessary in the Common Market. It is equally necessary that we should monitor its use carefully. I know about the advantages, which are easy to see. If we know that there is not a deadline by which money appropriated for schemes must be spent, there is greater flexibility. It avoids the piling up of expenditure in the last few months of the year to ensure that the funds are spent. From time to time we have seen the effects of that on Departments in this country, which have been anxious to spend the money in the year rather than carry the amount forward in a more orderly manner and spend it in the following year. Under the carry-forward system a more orderly programme can be built up by the executive according to the circumstances which arise.
The sums involved may be substantial. I instance the 1974 budget. Two sorts of carry-forward figures are involved, automatic and non-automatic. The automatic sums are committed in the year but are not spent. Those figures are carried forward without any consultation with Parliament. The non-automatic sums are also carried forward—here is a weakness—only after consultation with Parliament. Parliament has no final say. The final say lies with the Council.
The following sums were involved. In 1974 the figure was 601 million units of account of non-automatic expenditure, amounting to 10 per cent. of the 1975 budget and its supplementaries. The automatic figure was 1,081 million units of account. The total was 1,682 million units of account, which was one-third of last year's budget. That means that a considerable amount was carried forward. I do not say that the money was misused. However, the situation must be carefully watched.
In the 1973 budget, sums were carried forward to the next year—this is a procedure about which I have grave doubts—and not used for their original purpose but were transferred to another category. That loophole must be watched carefully. We could well argue that an item of expenditure had not been approved in a given year although the executive could say "We did not spend this amount the previous year so we shall transfer it in another year" and solve the problem. Those are the difficulties. I accept the principle although believe that the procedure should be tightened up and that auditing and control must be strengthened.

Mr. Spearing: Will the hon. Gentleman explain the question of transfers, to which he referred? The budget contains chapter headings. The hon. Gentleman suggested that sums are moved from one to another or some unspecified authority from one year to the next. Will he tell us who has the power to change this, if it is not the Council of Ministers or Parliament?

Mr. Shaw: I am interested in the power of Parliament. Up to date Parliament has had no worthwhile power to deal with transfers. I am concerned with that problem. Our powers over transfers must be strengthened. I hope that they will be strengthened.

Mr. Spearing: This is an important point, as the hon. Gentleman has said. If Parliament has not had the power to transfer sums between one heading and another—the hon. Gentleman made a statement to the effect that such transfers take place—will he say who made the decision to transfer them?

Mr. Shaw: The original decision must be made by the Commission. The Council must approve it.
We are consulted only about the non-automatic carry forwards. Obviously, budget transparency can be largely lost because the sums voted in one year may be different from those spent in that year. I put these points to show that there are disadvantages involved in carry-forwards, although on balance there are advantages and the system is necessary as long as it is properly monitored.
In looking at the 1974 figures we insisted on receiving an adequate explanation why the sums of money were brought forward. This year, in the majority of cases the Commission gave adequate explanations as to why the sums should be carried forward. It has been established that in seeking approval it should show that the sums involved are of an exceptional nature. It has done that except in two instances.
Whilst approving the principle of carry-forwards, we must seek to define satisfactorily the exceptional character of the expenditure which we shall allow. We must seek to keep the carry-forwards to a minimum. We must ensure that Parliament has more authority in the control of non-automatic approvals. We must seek to simplify Community procedures where there is an element of complication in the procedures under which aid is given which leads to delay and the necessity for carry-forwards.
Parliament reluctantly gave its approval for the carry-forward of two items. I refer to the aid given to durum wheat and olive oil. I felt diffident in giving my approval to those items because in no sense could that expenditure be regarded as exceptional. The aid being carried forward relates to aid as far back as 1970. That demonstrates that there is a breakdown in the system either at the Community or national level.
Parliamentary approval was given on the basis that the Budget Committee would make further inquiries into both these items to ascertain what went wrong, to report to Parliament, to show the experience of the carry-forward of those two items and, if necessary, to report to the European Parliament. I hope that as a result of the inquiries now being conducted we shall be able to contribute to a better understanding of the problem and to an improvement in the system of audit control.
The importance of the establishment of the Court of Auditors cannot be over-emphasised. Experience has shown that the audit provisions in operation in the early years of the Community were under-estimated and to a certain extent ineffective. The Court of Auditors needs much more power, which means more staff and therefore more money. Above all, we need an independent Court of Auditors. It is with this end in view that the new organisation is being set up, and I hope that it will shortly be approved.
Speaking as a member of the Budget Committee, I consider that we should see to it that some form of Public Accounts Committee procedure is created whereby we can liaise with the Court of Auditors and play our part in inquiring into areas in which we feel that inquiry is warranted, so that we can establish that the money that has been voted is properly used. We shall be able to establish a procedure along those lines that will make more effective the supervision within the Community of Community revenue and expenses, and at the same time we shall ensure that what the Court of Auditors does will have a beneficial effect on the control by member States of their own moneys which they are handing out for use in various sectors. The problem is not just a Community one but it is also connected with national expenditure.
The debate has been very valuable. The Community is a growing Community, and as we increase our responsibility so we must increase our power to see that the money that we have collected and sanctioned is collected and spent in the way we intended. There is every indication that we are getting the framework right so that those objectives shall be achieved.

1.13 p.m.

Mr. John Lee: I hope that the hon. Member for Scarborough (Mr. Shaw) will not think me impertinent if I say that I have never come across a chartered accountant who took so philosophic and relaxed an attitude towards expenditure as the hon. Gentleman evinced in the last few minutes of his speech. If he wants and is hopeful of better scrutiny of expenditure in Community affairs—and I accept that he is—his attitude, bearing

in mind his training and expertise, seems to be a remarkable exercise in optimism.

Mr. Spearing: Does my hon. Friend agree that in the professional capacity which he says the hon. Member for Scarborough (Mr. Shaw) occupies, he has given us a heavily qualified certificate?

Mr. Lee: That is a fair comment. When I learnt that this debate was looming, as always in Common Market exercises, I went to the Vote Office and collected a mountain of paper. The Official Journal consists of about 500 pages, there are nine explanatory memoranda and seven consultative documents. I have said on previous occasions—and one day I shall carry out my threat—that if we are presented with this kind of compendious debate in future, if I am called, I shall take up the whole time by reading the documents and talking out the debate. I give the Government fair warning that if there is a repetition of this farcical procedure, I shall do just that.
I appreciate that it is not wholly the Minister's fault that we are in this position. The Lord President of the Council has a good deal to answer for in the way in which the procedures of the House are being conducted on EEC matters. I do not propose to go over all the ground covered by my hon. Friend the Member for Newham, South (Mr. Spearing) about the way in which EEC matters have been dealt with in the past.
To conduct what purports to be a budget debate on a motion for the Adjournment of the House is profoundly unsatisfactory. We are trying to combine the functions of the Public Accounts Committee, the consolidated Second and Third Readings of the Finance Bill, an Estimates scrutiny procedure and an Estimates debate all within the compass of one debate relating to all the portfolios that we have to consider.
That is an intolerable burden to place upon the House—or, at least, I suppose that it would be if those of us who dissented from the Common Market policy, and still do, could believe that this procedure was seriously intended to contribute to the scrutiny of the expenditure of funds provided by the taxpayer. The very fact that we are debating this matter six months after the time when we should have been doing so and a long time after


the proposals have become operative illustrates the farcical character of the procedure.
I agreed with the hon. Member for Scarborough when he seemed to be saying "I despair of proper scrutiny of expenditure and proper examination of Vote procedure, so I am relying upon the audit procedures being strengthened to make sure that the expenditure is properly incurred and properly scrutinised". I do not know whether the hon. Gentleman accepts that interpretation of his words.

Mr. Michael Shaw: The hon. Gentleman is inconsistent. Earlier, he and his colleagues were pressing hard for a form of audit procedure similar to that which operates in this country. We have a perfectly proper way of scrutinising Votes and I do not see why he should make remarks in that vein.

Mr. Lee: The hon. Gentleman, I think, has misunderstood me. In so far as the audit procedures have been improved by this new machinery, I welcome it. What the hon. Gentleman seems to be saying is that he regards a strengthened audit procedure as being an adequate substitute for detailed scrutiny of the kind that Parliament gives to Votes in advance of expenditure. I cannot accept that, and I do not think that the hon. Gentleman, on reflection, will regard that as adequate. He seems to accept that, so little power have we over what goes on in Brussels, audit control is a second best and to some extent a compensation for the fact that we have so little power.
If from the start the Common Market had been a genuinely democratic federation and there had been an assembly with legislative rather than consultative powers, the problems we now face might not have been so acute. The hon. Gentleman pointed out that the institutions in the Common Market were in operation carrying out the budget procedure long in advance of the Assembly's acquiring any powers, which suggests that it is almost impossible for the Assembly to acquire the kind of powers that any self-respecting Parliament would require to enable it to enforce its will over the executive.
I turn to the question of the audit court. I shall ask a series of questions which I hope my hon. Friend will be able to answer. I hope that he will be able to give us some idea of the power

of the audit court. I want to know a little more about its powers of subpoena. My right hon. Friend the Chief Secretary said that it has the power to summon witnesses. That is what I think I heard him say. I am anxious to know a little more about the powers of enforcement. I want to know more about the penalties that would follow from non-compliance. I assume that the court will have the power to subpoena documents as well as witnesses. Clearly no court or judicial procedure can ever be effective unless it has powers to get before it documents as well as persons.
In the event of default, I want to know who will be responsible for taking proceedings against those who are defaulting or defying the court. As I understand what my right hon. Friend said in opening, he was implying that each country will deal with its own offenders. However, that does not deal with the problem of enforcement or with the powers of the court from the point of view of securing information for the purposes of a proper scrutiny of expenditure.
When my right hon. Friend said that each country must deal with its own offenders—those are his words and not mine—I understand him to mean that the revelation of fraud will be dealt with under the fraud law of the country concerned. That must follow unless and until we have a common law on fraud throughout the Community and unless and until there is a common legal criminal system. We need to know more about the powers of enforcement in those respects.
I am not concerned only with criminal acts or misfeasance but with inefficiency and improper expenditure that falls short of criminality or provable criminality. I should like to know what power the court will have regarding the imposition of surcharges. The word "surcharge" has not so far been mentioned in this debate. Having regard to the relaxed way in which the Community regards expenditure, and the way in which it can transfer expenditure from one head to another or carry it forward and then transfer it, there is an obvious need for such provisions. I should be grateful to have more further information about that.
I should like to know a little more about the number of occasions when the past auditing procedures have been


operated successfully. We need to have some yardstick against which to measure the new procedures. The hon. Member for Derbyshire, West (Mr. Scott-Hopkins) was being a little naïve when he played down the amount of fraud that has occurred so far. It was pointed out to the hon. Gentleman that it is pretty obvious that it is the fraud that we do not know about that matters. Of course, we can only speculate about that. Our own domestic experiences over the past few years have demonstrated most dramatically that in all probability for every fraud that is discovered there must be a dozen or so that go undetected. That is because there are so many people involved. There are so many people who have an interest in silence that there is a great deal of difficulty in investigating effectively.
If that situation applies within our own country within local government, and with regard to Government contracts—and it has been a sorry story over the past two years—I would have thought that the amount of fraud might be very much greater when there are problems such as the crossing of frontiers, different legal procedures, differences of language and greater distances. I want to know how far the procedures have been successful in the past and in what areas we may expect there to be improvement as a result of the new system that is to be introduced.
I hope that the Minister will seriously take to heart the strictures which my hon. Friend the Member for Newham, South made regarding agricultural expenditure. My hon. Friend has obviously made some study of the matter and the House should be grateful to him for having raised some specific items. I am not suggesting that they are typical of the Community's agricultural policy, but I think that the CAP is a bad policy. However mitigated are its disadvantages, I do not think that it will ever be satisfactory. We have at least a right to be reassured that the kind of scandalous matter that my hon. Friend has brought to our attention as regards the skimmed milk situation in under-developed countries will never occur again.
Of course, the Common Marketeers have been preening themselves for some months over the Lomé agreement and

the extent to which they thought they had parried the accusations of indifference to the welfare of the Third World. To the extent that the Lomé agreement has provided economic assistance for the under-developed world that would not have otherwise been forthcoming, I welcome it. Those who were responsible for negotiating the agreement—and my right hon. Friend the Member for Lanark (Mrs. Hart), who has now left the Government, was partly responsible—have succeeded in their task, and they deserve credit.
The kind of episode to which my hon. Friend refers tends to earn—and perhaps disproportionately—discredit for the Community. It tends to strengthen suspicion —it is partly justified but sometimes exaggerated—that the Community does not care so very much about the less fortunate parts of the world and that it is the rich man's club that so many of us have accused it of being.
I echo my misgivings and express my cynicism about the effectiveness of this sort of procedure. I think that the most revealing remark of my right hon. Friend was when he said that the Council is responsible for 85 per cent. of expenditure and that the Assembly is responsible for only 15 per cent. That puts the Assembly in its proper perspective. If we had a domestic situation of a comparable character, in which Parliament controlled only 15 per cent. of expenditure and Government could be made answerable for only that proportion, we would regard our proceedings as representing nothing more than the talking shop which the hon. Member for Scarborough cheerfully conceded the Assembly has been for much of its time.

Mr. Michael Shaw: Originally. I was exercising the point that it was developing. I hope that the hon. Gentleman will not deny that.

Mr. Lee: I agree, and I am sure that the hon. Gentleman genuinely believes that it will develop its powers. I am sure that he and his hon. Friends will try to achieve that objective. But they have a daunting task before them because we start from the position that the Community must still seek to conduct its expenditure policy in a proper way. These matters are difficult for the Community, and indeed it is difficult even in


this country for Parliament to control expenditure. In the United Kingdom it took a civil war to reach the present situation, but in dealing with the institutions as labyrinthine as the Common Market I wonder whether the hon. Gentleman's optimism could ever be seriously justified. I doubt whether they will ever succeed in obtaining complete control of expenditure, although they may succeed in some measure.
My right hon. Friend the Chief Secretary at one stage in his speech indulged in a piece of parody when he said that it was a good thing that money should be spent on the purposes for which it was authorised. It was as though he was expressing truism, such as "I am in favour of the Gulf Stream" or "I am for the law of gravity".

Mr. Joel Barnett: Mr. Joel Barnett indicated dissent—

Mr. Lee: Obviously my right hon. Friend believes that I have misunderstood him, but if his view is that money should be spent on the Votes for which it is appropriated we would all agree with that view. The fact that he thought it necessary to express that view is a revealing commentary on the state of affairs in the Community.
The right hon. Gentleman mentioned the system of carrying forward, and apparently the hon. Member for Scarborough regards that as satisfactory. I do not think Labour Members regard that situation as satisfactory. I only hope that the Government will prevail on the Common Market to abandon that kind of budgetary process. Obviously it makes for less effective control over expenditure. All Governments—be they good or bad, national or federated and whether or not they are on a short rein on matters of expenditure—would not object to a large amount of money being spent on the right objects. However, we all believe that expenditure should he tightly controlled and properly scrutinised.
I should like to comment on the speech made by my hon. Friend the Member for Farnworth (Mr. Roper), who is a Common Marketeer par excellence. We do not agree on very much in this area of activity, but his remarks on CAP should commend themselves to us all. Although the expenditure on CAP consists of one-fifth of the total Community

expenditure, as things stand we do not have a proper breakdown. Therefore, we shall not have adequate data to assist us in scrutinising the most important item in the budget.

Mr. Roper: Perhaps I did not make the point clear. The change in procedure will mean that, although we shall receive the general budgetary figures, it will not be possible in respect of agriculture for the figures to be as available to us as the other figures will be. I was asking whether those figures could come forward. We shall have the agricultural figures at a later stage in the year, but not at the new date of 15th June.

Mr. Lee: Furthermore, we shall not have them in time to discuss these matters in debate. It is a modest requirement, and I hope that the Government will give the matter sympathetic consideration. If that does not happen, some of us will want to know why.
This has not been a wholly useless debate, but it is a rather melancholy affair. I hope that this debate will not be repeated in quite its present form. Perhaps next time these matters will be properly debated and will not be taken on an Adjournment motion, in relation to which it is impossible to call a vote. It is a thoroughly unsatisfactory situation and it has no parallel in this country in relation to our own expenditures. I hope that we shall never have a debate of this nature again.

1.37 p.m.

Mr. Ivan Lawrence: I shall be brief. I wish to comment on two matters which have disturbed hon. Members on both sides of the House. The first relates to procedure, and the second to the question of fraud.
Avid pro-Marketeer as I am, I have always admitted that the anti-Common Market argument, based on the diminution of sovereignty in this House over decision making, has some force so long as the procedures by which hon. Members discuss Community decisions on the Floor of the House are not substantially improved. It is ridiculous that we are now discussing the present budget six months after the proposals were first put forward and months after their implementation. It is ridiculous that we should


discuss matters of this kind from documents which are obsolete. Although on this occasion we have been assured that these documents are not obsolete, we have been told on earlier occasions when discussing Common Market matters that the documents concerned have been obsolete.
Furthermore, it is ridiculous that we have been able to discuss such matters for a period of only 1½ hours late at night. I am not sure that the experiment by which we are now debating these matters on Friday is all that successful, judging by the number of Members who are in their constituencies. The public does not appreciate that on Fridays hon. Members have many pressing engagements, and that is the reason why so many are not here today. Nevertheless, these matters which are now before us are of the gravest importance to this country and, so far, we have not got the procedures right.
What steps does the Chief Secretary propose to take to remove the ridiculous aspects of our control of proceedings in the decision-making process? My hon. Friend the Member for Saffron Walden (Mr. Kirk) suggested that there should be an earlier debate on the maximum budget estimates. That would be a considerable improvement, but it does not completely solve the problems any more than does the move to slow down the timetable by the Common Market Commissioners.
We are debating these matters not just a short time after implementation but a matter of six months later. As the length of time increases, more documents can be produced so there may still be doubt whether the documents are right. I have a common purpose with the hon. Member for Birmingham, Handsworth (Mr. Lee) in calling on the Government to recognise their own failings in not giving sufficient priority to Community matters to be discussed in this House. But this is a failing not only of government but of the Community itself. Could not the Government through our national delegation seek to make alterations in the European procedures so that this Parliament has an ample opportunity to debate important proposals before they are implemented? Perhaps we can have some assurance from the Chief Secretary that he will do what he can to motivate the Government to force the Commission to make

things easier for us in this place to discuss matters before rather than afterwards. Cannot steps be taken to ensure that we discuss documents which are current rather than obsolete? Will the Chief Secretary give the House some idea of its thinking? Will he assure the House that at all stages the interests of this House, which reflect the deep concern of the people about control over what happens in the Community, will be upheld?
Secondly, I should like to refer briefly to the aspect of budgeting concerned with abuse and fraud. Obviously, a court of audit, if it tightens up the opportunities for abuse, is welcome. However, we should not underestimate the ingenuity of financial criminals whose scope of activity is widened as international trade flourishes.
I should like to put four questions to the Chief Secretary. First, our national policing procedures will have to be extended and improved in order to effect a closer liaison with international police forces. Unfortunately, notwithstanding Interpol, international police conferences and agreements, whenever one of our people loses himself in another country we have the greatest difficulty in following him. Common police procedures, I suggest, should be agreed and far simpler than they are. Something will have to be done to make those procedures more effective. Has the Chief Secretary something to offer us along those lines?
Secondly, as the hon. Member for Birmingham, Handsworth said, there will have to be harmonisation of the fraud law between countries, internationally, whether it is statute law or our own common law. This is important also when it comes to serving subpoenas outside the jurisdiction. It is all very well having a legal offence which is capable of being tried in more than one country, but, if we cannot subpoena witnesses outside the jurisdiction and bring them here, the whole thing is a hollow exercise. Perhaps the Chief Secretary can give us an assurance that his colleagues are thinking about the problems which the harmonisation of international fraud legislation involves.
Thirdly, there is the question of bringing fugitive offenders within the jurisdiction. I have no doubt that this is something which is easily achieved under the


various treaties for the countries within the Common Market. But what about countries which trade with the Common Market under Common Market agreements but do not come within the ordinary international rules governing fugitive offenders? Is some thought being given to the process by which we can bring back somebody who should be tried before a British court from a country which is trading with the Common Market under Common Market agreements but is not a party to the joint legal arrangements?
Fourthly, we are justly proud of our domestic legal procedures. We are jealous of surrendering legal sovereignty to extra-national institutions. The Chief Secretary was absolutely right when he said that we have jurisdiction over frauds committed in this country and there is an appeal process to our own appeal courts. However, the European Community's court has jurisdiction over the interpretation of its directives. If an issue arose over the interpretation of such a directive, it would have to be dealt with by reference to the European Court. I should like to be assured that the Government are taking steps to ensure that the procedures for reference to that court on questions of interpretation of directives which might arise will never interfere with our own judicial processes or delay the conclusion of criminal proceedings against a person who has been brought for trial to this country. Will the Chief Secretary assure us that those matters are currently being given consideration?
I should not like to conclude before I have said something about our own national delegation to the European Parliament and the Members of the Scrutiny Committee who have worked so hard for this House. I have the greatest admiration for those Members of the Scrutiny Committee who have sat hour-in, hour-out, wading through the turgid documents that pour out of Brussels, often burning the midnight oil, under the leadership of my right hon. Friend the Member for Knutsford (Mr. Davies). I should also like to express the great admiration that I have for the Members of the mainly Conservative parliamentary delegation who, under great strain, have represented the interests of this country in the European Parliament.

The public do not appreciate that these Members of Parliament have still to conduct their own parliamentary business in the House as if nothing extra were happening. They have a vast amount of travelling to do, which incurs considerable fatigue. I do not think that we have ever given them enough credit for the splendid work which they have done. I am delighted that the Labour Party is now sharing the burden, though not to the satisfaction of all parties in the House. I express my own personal regret that the Member for Farnworth (Mr. Roper) has not been included in that delegation, because I know that he is an avid hardworking and diligent student of European affairs.
I hope that it will not be too long before direct elections further help to remove the almost intolerable burden upon the shoulders of those who have worked so hard for this Parliament over the past two and a half years.

1.47 p.m.

Mr. Russell Johnston: On behalf of all hon. Members who have served at the European Parliament, I should like to say how much I appreciate the comments made by the hon. Member for Burton (Mr. Lawrence). His comments were so glowing that I thought for a moment he was not talking about my colleagues and me at all.
I agree with the hon. Member for Burton about the nature of the debate and the day and time on which it has taken place. I am a Scottish Member of Parliament, but my comments apply to hon. Members from Scotland, Wales and the North of England. In general, it is particularly difficult for us to be in the House on a Friday. We sometimes feel that matters are ordered for the benefit of London Members. I see Members on the Treasury Bench vigorously shaking their heads. It is wrong on a Friday to have a general debate on EEC matters as opposed to the normal consideration of Private Members' Bills, which involve particular interest and, therefore, the willingness to sacrifice time which is normally given to constituents.
Secondly, there is a wide diversity of material which, in the time available, we are supposed to discuss today. I have here the Community budget. I am sure that if I threw it at the Chief Secretary it would


do him some damage. It is a very large document comprising 591 pages.
In addition to that large document, we have another clutch of consultative documents covering a variety of admittedly related subjects, but each one is entitled to close attention, as the hon. Member for Newham, South (Mr. Spearing) indicated. We have the report of the special committee of inquiry on milk. We also have the report of the EAGG, Guarantee Section, on the milk products sector. That is a 43-page document. There is also the oil seeds and olive oil sector, but perhaps that is not particularly relevant in view of our climatic conditions. However, I am certain that the money which is expended upon it and the way in which it is expended is relevant, because we contribute to it.
Unfortunately, the hon. Member for Birmingham, Handsworth (Mr. Lee) has left the Chamber. A moment ago, he was dilating with some enthusiasm at the marvels of this Parliament and its great power of scrutiny and capacity to control the executive. I do not think this sort of debate is more than a symbolic gesture. There is no reality in it, particularly as we are dealing with a retrospective situation and there is nothing we can do anyway except, perhaps, to say that what has already happened is unsatisfactory and presumably should not be allowed to happen again.
My party naturally supports the establishment of the Audit Court, the review of legislation and the proposed increase in the time for examination of the budget by the European Parliament. I cannot expect more than a general expression of opinion in a debate of this sort, but I would like the Chief Secretary to say where the Government stand in this argument about control vis-à-vis the Council and the European Assembly. The argument between the Council and the Parliament is an argument between that Parliament and our Government because they are part of the Council. I would be interested to hear the thoughts of the Chief Secretary on the way in which the budgetary control powers operated by the Parliament are to he extended.
It is a pity that the hon. Member for Handsworth has temporarily left us. He gave a distorted picture of the situation by contrasting what we do here with what is done, admittedly hesitantly, in the European Assembly where procedures are in a state of evolution.
It is one of the characteristics of politicians that they spend part of their time trying to increase expenditure on various projects they favour and the rest of their time trying to decrease expenditure on projects they do not favour. The hon. Member for Handsworth apparently cherishes the fond belief that this Parliament has immense control over expenditure. The Government have some control—though even they run out of control from time to time—but the effectiveness of hon. Members in this matter must not be exaggerated. We cannot use the argument "Look how wonderful we are" to take a stick to the European Parliament. That is not a proper, balanced argument. The European Parliament has a right to amend its budget. We do not have such a right.
The hon. Member for Farnworth (Mr. Roper) mentioned the subject of claw-back when referring to the problem of fraud. This is an interesting question, but I said all I wish to say in my intervention during his speech. It is, however, necessary that the Chief Secretary should say something on this subject. There has been an article in the Sunday Times which makes a straight accusation that the Government have been misusing money from the social fund, not in a fraudulent way but to balance their books. There is real concern in the Commission and the Regional Committee of the Parliament that various countries might use the money they get from the regional fund as a claw-back and not for specifically regional purposes.
The Commission thinks that there ought to be—to use its horrible phrase—global additionality. In simple English, it believes that the money should be regarded as an addition to already committed expenditure on regional development. I think that Ireland and Germany have expressly stated that any money they receive from the fund will be regarded as an addition. I am not sure about Germany. The Chief Secretary


shakes his head; he may be right. Certainly this country has not made such a declaration, and if the Chief Secretary could make a categorical statement on the subject in this debate it would be very significant. I do not understand why the Government are so coy on this matter. There are tremendous monitoring problems, but these could be overcome, particularly since we are continually telling everyone that our procedures are excellent and that problems faced on the Continent are hardly likely to trouble us.
There are only 12 people working full-time for the regional division of the Commission in allocating money through the regional fund. This is quite inadequate, and the Government should be looking at the way in which an important section of Community policy, which will bring benefits to many parts of this country, is being serviced. Otherwise, there will be delays.

2.0 p.m.

Mr. John Pardoe: In some ways this has been an unsatisfactory debate on a matter of such immense importance because in any Parliament it is of the first importance to control expenditure. It has been unsatisfactory to one who does not have the specialised knowledge necessary of the complex subject of the European budget.
I had hoped, for instance, that the Chief Secretary would tell us a little more about this document. He dealt primarily with two or three of the papers but not with the budget itself and I understand why he did not wish to plough his way through 500 pages, a threat we have had from his hon. Friend's on the bench below the Gangway. This is an important document, albeit 500 pages long, and it would have been helpful if the right hon. Gentleman had told us something of how it is made up, of the procedures which lead to the total and of how the Government see the procedures developing so that we in this country may feel that we at least are controlling European public expenditure.
I regret having to raise certain questions of detail in this House. It always seems to me that control of expenditure is better exercised where the expenditure takes place. It is the essence of democracy that democratic institutions

devise their own expenditure control systems. We have devised ours over the years. I do not think that any of us would claim that they are perfect—far from it. They should be changed to suit changing circumstances, and perhaps ours have not changed quickly enough to control the expenditure for which this House is directly responsible.
Many of the fundamental questions involved in public expenditure in the European Community would be better dealt with by a democratically elected European Parliament. We have to consider, however, whether the present European Parliament is adequate to the task, and whether therefore we in this House have to take much greater responsibility for exercising that control. I believe that we have to do so. I am not even convinced that if and when we have a directly elected European Parliament—because it very much depends on the nature of that institution when it is developed—it will be an adequate body to supervise this extraordinarily important matter. We in this House are heirs to a whole host of traditions in public expenditure control, and of course particularly those which arise out of the cry of the Puritan revolution—"No taxation without representation". The full implications of that should be understood in this House, if not in the whole of Europe. No Parliament that is not democratically elected can have the democratic legitimacy and authority to control and oversee public expenditure.
But even if we accepted that the present appointed—some might almost say annointed—European Parliament, while not satisfactory, is nevertheless better than nothing—it is perhaps the best we have—my party and the views it represents are not adequately represented in that Parliament and we shall not in the future have representation in accordance with the requirements of democracy or national justice. Indeed, the representation to be offered to our viewpoint in the European Parliament, whether on matters of budgetary control, public expenditure or whatever, falls far short of that standard of representation implied in the cry of "no taxation without representation". We must therefore seek to use this British Parliament to represent our views on the control of expenditure of the EEC and


on which we are denied adequate representation elsewhere, in that place where it might be better exercised.
I wish to concentrate on one or two detailed questions which arise out of the pages following page 49 of the Official Journal of the Communities, the 500-page document. This is only an example. It concerns the section of the journal dealing with expenditure on the European Parliament. On page 49 we are asked to approve total expenditure on the European Parliament of some 41,927,229 units of account. On the basis of the calculation of 58p or 60p per unit of account, I make that about £25 million. How is it possible for us, knowing as little as we do of the detailed day-to-day work of the European Parliament, to decide whether that expenditure is appropriate to the task that has to be carried out?
It might be helpful to make some comparisons with similar expenditure in this House. The Supply Estimates for 1975–76 give details of the gross expenditure for the House of Commons. That is not an inappropriate comparison since, although we have a bicameral system, it is the House of Commons expenditure which might be directly relevant. Does the Chief Secretary accept that the approximate figure of £25 million for the European Parliament is directly comparable with the figure in the Supply Estimates for this House of £9,047,000?

Mr. Jay: Presumably the figure for this House would include the salaries of Members, while that for the Common Market Assembly would not. Is that correct?

Mr. Pardoe: I am coming to that point in a moment, but it is a perfectly fair matter for the right hon. Gentleman to raise. On that basis we should have to deduct £2,959,000 for those salaries, which leaves about £6 million. Is it true that the European Parliament in this financial year will cost the people of Europe four times as much as this House costs this country?

Mr. Russell Johnston: My hon. Friend should remember in making this interesting comparison that all the proceedings of the European Parliament have to be translated into six different languages. The cost of interpreters and transcribers is therefore immense. He should also

remember the amount of travel involved and the distances covered by representatives. He should also remember that one of the things which is done in the European Parliament which is not done here and which should be done here is direct support and servicing for the political groups.

Mr. Pardoe: I was about to come to come to some of those points. I am glad that my hon. Friend has come to the defence of the European Parliament. I am not necessarily attacking it as an institution, but I want to make it more nearly perfect. However, I dissent from the view that perfection necessarily comes with the expenditure of public funds. There is no direct correlation between the two.
I am sending a warning shot across the Treasury Bench to try to obtain an official explanation of the figure. If my hon. Friend had waited he would have heard me talk about the strange fact that there is an almost direct relationship between the expenses paid to Members of the European Parliament and the expenses figure in the document from which I have just quoted, the Supply Estimates for this House. They are within £100,000 of each other. Therefore, I do not think that the expenses side, including people having to travel further in Europe, is the answer. It may well be that the cost of interpreters is the answer. If so, let us hear it from the Chief Secretary.

Mr. Russell Johnston: In making these comparisons between expenses, my hon. Friend will bear in mind that this Parliament has 630 Members and the European Parliament has only 198.

Mr. Pardoe: That make it infinitely worse. I do not have a pocket calculator with me, but if I did a calculation of the costs per head it would be a considerable sum.

Mr. Jay: Does the lion. Gentleman agree that if the calculations were made for the cost per man-day the result would be even more striking?

Mr. Pardoe: I am sure that it would. There are some fascinating calculations to be done. I have not yet done them all, but we are opening up territory which seems to me to be very valuable.
I want to know from the Chief Secretary how comparable he believes the figures are. He may well be able to tell us that they do not contain the same items of expenditure. I do not doubt that there are substantial differences in the way in which the two figures are made up, but on the face of it there seems to be a strange discrepancy.
I come next to the numbers of staff. On page 50 we find that the total of permanent posts in the European Parliament is 1,082 in the financial year 1975, with 124 temporary posts, making a grand total of 1,206. When we add up the various sections in our Supply Estimates —108 in the Department of the Clerk of the House, 84 in the Department of the Speaker, 168 in the Department of the Serjeant at Arms, 68 in the Department of the Library and 36 in the Administration Department—we reach a grand total of 464 people. There are no other items listed in that document. There may well be further amounts, but my guess is that that is about right.
So we find that not only does it take four times as much money to run the European Parliament, for not much more than one-fifth of the number of members, but that where it takes 1,206 members of staff to run the European Parliament, it takes us only 464. Are those two figures directly comparable? If not, where is the mistake in the calculation?

Mr. Russell Johnston: One simple mistake that my hon. Friend is making in his calculation is to compare the Parliament of one country of 50 million people with a Parliament endeavouring to serve nine countries with 250 million people. It is not possible to make a direct comparison.

Mr. Pardoe: I am happy to accept my hon. Friend's argument that obviously a Parliament representing nine countries and 250 million people cannot be directly compared with our national Parliament. The estimates that I have produced may not be directly comparable, but at least they give a guide. How else do we make any assessment whether the expenditures that we are being asked to approve are justified?
I am not ploughing my way through all 500 pages of the document. No doubt we could do it and come up with the came kinds of difference. How do we

decide whether these amounts and staffing ratios are appropriate other than by a comparison with that of which we have considerable knowledge—our own show? The differences that I have quoted are so substantial that they need an explanation from the Government.
I refer the Chief Secretary to page 51 of this magnificent Official Journal of the European Communities. Under the heading "Section I—Parliament" there is a table of all the categories and grades of staff employed. I should like first to know what the categories mean, because nowhere in the 500 pages can I find an explanatory note. It is easy to lose them in 500 pages. Perhaps the Chief Secretary can say where the explanation appears and what the categories mean. I presume that the grades are salary grades.
I draw the right hon. Gentleman's attention to the final right-hand column where he will see that the numbers of staff for the Parliament are set out in the various grades. For example, under Grade 2, Category A there are seven in the temporary establishment for 1975. This is followed by the figure 1 in brackets. The footnote bearing that number says:
6 for the political groups".
The second footnote says:
3 for the political groups".
The third says:
9 for the political groups".
All those footnotes refer to staffings for the political groups. How are those staffing ratios decided as between the various political groups in the European Parliament? Clearly, the European Parliament takes the political groupings extremely seriously, rather more seriously than we take them in this House. It would be interesting to know whether the staffing and the expenditure on staff are allocated on the basis of votes or seats, or a combination of the two—as, for example, in the allocation that we have arrived at in this House of what is commonly known as the Short money.
On page 62 there is a table of great complexity. I must admit that I have not the foggiest idea exactly what it means. It is important that we should know, because the table lists expenditure relating to persons working within the


institution, which means the European Parliament. The headings are fascinating. This relates to the point that the right hon. Member for Battersea, North (Mr. Jay) raised just now. Under Chapter 10, the heading to Article 100 is:
Salaries, allowances and payments related to salaries".
Item 1000 under that head is "Basic salaries". But there are no basic salaries, and so there are no entries under the headings of appropriations for 1974 and 1975 or expenditure in 1973. Why, then, is the item "Basic salaries" there? Is it already assumed within the European Parliament that we shall pay basic salaries? May we know whether there will be basic salaries before direct elections or only afterwards? Will the delegation to Europe that we have been debating over the past few days, and shall continue to debate, be paid basic salaries?

Mr. Jay: This would give the Treasury another opportunity for claw-backs, which has been mentioned.

Mr. Pardoe: I am sure that the Chief Secretary will take that on board.
Then we come to item 1,001. [Interruption.] The Chief Secretary must not complain. His Government have allocated a Friday to debate 500 detailed pages about European expenditure. I am merely concerned with a small but immensely important section of those 500 pages. Alongside item 1,001 there is the heading "Residence allowances". Again, there are no entries under the headings of appropriations, for 1974 and 1975 and expenditure for 1973. What are they? What will these be when they exist? Are Members of this House to be paid residence allowances to buy themselves plush suites in houses or flats when they go there?
The next, more interesting heading, is "Family allowances". There is no entry against them. I know what family allowances are in our terms and in French terms. They are rather larger in France than they are in Britain. However, what are family allowances in connection with the European Parliament? Shall we find that Members of this House who are sent in the European delegation to the European Parliament will be paid on a pro-rata basis according to their fertility?
The next heading is "Representation allowances". I should have thought that all allowances were representation allowances. I have nothing against that at all.
Then we come to the travel and subsistence allowances. There is an item here which I do not quite understand. It is worked out in units of account. For 1975, the appropriation is £2,784,600, which is rather less than the total expenditure we incur here.

Mr. Roper: Has the hon. Gentleman, who is obviously finding this document fascinating, got as far as page 214? If he has, he will understand that the Community has a common budgeting code which it applies to all people working in all parts of the institution. He will find that the codes 1,000, 1,001, 1,002 and 1,003 apply to everyone within the Community. He will find exactly the same numbers for the members of the Commission, except that they have other numbers next to them. Unfortunately, the hon. Gentleman had not had time to read, perhaps, to page 262 before making his intervention and, therefore, failed to understand.

Mr. Pardoe: If that is clear to you, Mr. Deputy Speaker, it is not clear to me. I have found page 262. It does not explain a thing. Nor does the hon. Gentleman's intervention. If he is saying that the Community simply clutters up the tables with a list of headings against which it has no intention of putting items, all I can say is, what a way to run a Community budget. It is better that we should do it ourselves.
Those are the main points I wish to ask the Chief Secretary. I hope that he has taken them on board. I am sure he has. It is immensely important that we have the answers to them today. We should not be asked to complete the parliamentary delegation from this House to Europe without knowing whether the Members of the delegation will be paid salaries and whether they will receive family allowances, because that would make some difference to our opinion about who should go. I should like to ask the Chief Secretary about the liability to tax of travel and subsistence allowances of the delegation. I understand that all the equivalents of the Inland Revenue Department in our neighbouring countries—the other Eight—wink a


blind eye at these and do not include them as taxable, whereas we do. It would be helpful if the Chief Secretary could give us a statement about that.

2.24 p.m.

Mr. John Davies: I have greatly admired the virtuosity and detailed arguments put forward by the hon. Member for Cornwall, North (Mr. Pardoe). However, I shall not follow them. I prefer to deal with one or two of the major underlying considerations and perhaps to ask for clarification on certain matters when the Chief Secretary replies to the debate.
There are three areas on which I want to comment. The first concerns procedure. There is a procedural aspect to this debate which has a certain importance today. Secondly, I want to comment on the control of expenditure, on which the Chief Secretary has helpfully had a good deal to say. Thirdly, I want to comment on the question of the evolution of the budgetary process in the Community, the effect it may have on member countries and their views about the Community budget.
First, I turn to procedure. We should join the Chief Secretary in commending the Commission, the Council of Ministers and the European Parliament on the steps they have taken and the efforts they have made to try to improve the procedural aspects of this budgetary presentation in order to enable us to have a better oversight of the European Parliament. I should like to add my words of tribute to that effort. However, their approach is sharply in contrast with the attitude of mind of the Government to the procedural question involved in these debates.
I draw the Government's attention to the fact that we are still labouring under the delusion that we are debating Community instruments in a meaningful way. We are not doing so. We are having useless debates, generally speaking at useless times, on matters of the foremost importance. The spectacle of this Parliament with 10 or 11 hon. Members present debating what must be a critical question on the use of the national resources over years to come is a commentary on the nature of the debates we are having.
A series of proposals is before the House—recommended by a Committee

appointed to do so—on how we can improve the nature of our debates. We have been assured by the Prime Minister and the Leader of the House from time to time that an early debate would be helpful on those subjects with a view to reaching conclusions and undertaking a debating method in this House which is more appropriate to the subject we are considering today. Yesterday we heard with dismay that the whole action is likely to be deferred until after the recess and that not until the tail end of this Session shall we have an opportunity of moving forward. Therefore, it is likely that no effective method will be evolved before the end of the year for debating these critical matters of the Community.
I turn to the Chief Secretary because he is present, not to reproach him personally but to reproach his Government for allowing this matter to drag on. We have literally dozens of issues outstanding for debate. We know that the Government will ensure that items essential to the transaction of their business in Brussels are debated, because they will bring them forward at the appropriate time. For the Government, the appropriate time is a date which gives the least possible time before the matters have to be concluded.
The purpose of this mechanism as we understood it was to do quite the reverse —to do it in a way that allows the Government to hear and give thought to the considerations, objections and comments of hon. Members and to obtain their views on Community matters in accordance with those comments. There is a very sharp contrast between the attitude of mind of the Commission and of the Community generally to facilitating methods of work in this House in terms of procedure and dealing with the subject and the attitude of the Government. I fear that the House has been severely let down by the Government on this matter.
I turn to the question of the control of the budget. I do not wish to go over ground that has been well covered already. I understand that it is the intention, and perhaps already the practice of the Commission in putting forward proposals to the Council, to send with them an assessment of the effect of those proposals on the budget. I understand


that it is Commissioner Cheysson's determination that as soon as may be no single instrument should go forward from the Council without having its financial consequences clearly stated on it. I welcome that. It will prove to be a much better control at the point of origin than anything which currently exists. I heartily suggest that the Government should emulate that line of thought by ensuring that the explanatory memoranda which come to the House comment upon the financial observations made within those documents both as regards the overall Community effect and as regards the national effect, so that when we have these instruments before us we shall have a clearer understanding of what the Government understand to be the likely outcome for this country in financial terms. It would be helpful if that were regarded as being a regular operation, in the same way as it is now to become one within the Commission.
I deal now with the evolution of the budget. We are debating a matter which is a fait accompli, but we are debating it with an eye to the future. As it stands, the budget is more comparable with the Estimates with which we regularly deal in this House. It is not unimportant to note that the budget will tend to become less of a statistical exercise and more of a document of management in the years to come. That is likely to happen first because there are already signs that budgetary decision making embraces certain policy decisions. There have been limited examples of this, notably in relation to the social fund. It would be quite wrong to repose totally on the belief that the budget does nothing more than assemble already agreed figures. That is not the case.
Moreover, as the European Parliament increases its contribution to and decisions in the budgetary process, that too will have a growing effect upon the budget, an effect which will become apparent at the time of consideration of the budget, perhaps more so even than when the instruments are considered. It is, therefore, necessary for us not simply to accept that the budget will in perpetuity be nothing more than a statistical assembly. As the years go by, it will grow to be more a document of management policy and economic management.
The Chief Secretary was right to point to the relatively minimal part played by the budget in relation to the total budgetary activities of the member States. This also is liable to change in extent and relationship. It is wise that we should not discard thinking about the budget as a document of economic management. I stress once again that I consider that the decision to defer the organisation of our debating system on these vital documents for months ahead is unpardonable. I serious ask the right hon. Gentleman to bring that point to the attention of his right hon. Friend.

2.34 p.m.

Mr. David Howell: I am glad to have the opportunity of participating from the Dispatch Box in this quiet but significant debate, since I am not a member of either the European Parliament or the executive. The debate is quiet because this is a Friday afternoon and not the "top spot" in the parliamentary week for any business, certainly not for business as important as this. It is significant because it is the first time that the House has had the opportunity to look at a whole Community budget and at the Community budget process in extenso. Although many of the points have reinforced the argument that we could do a lot better in the way we tackle this subject, this is the first time we have looked at it and it is, therefore, historic in the evolution of this nation's relationship with the other members of the EEC.
The recurrent point throughout all the contributions has concerned the timetable. Whatever the difficulties are, the timetable could be better. I would like to think that this time next year—it is too late for the 1976–77 budget—there will be an opportunity for us, hopefully not on a Friday afternoon or after 10 o'clock at night, to examine in detail the preliminary draft budget for 1977–78 brought forward by the Commission. It was always the hope of many of us who are interested in parliamentary reform in this place and in membership of the European Community that opportunities hitherto denied to this Parliament would open up to enable us to comment on proposals and ideas before they have crystallised and hardened into policy as they pass between the Commission and the Council.
We always argued, contrary to those who saw a loss of sovereignty involved for this House by membership of the Community, that whatever the validity of some of those arguments there were counterarguments which promised a great increase in the control and influence of this House over policy before it was ready-baked, served up and Members were told "There it is. Take it or leave it." I hope that this can happen with the Community budget. What is needed is an opportunity for this House to debate preliminary draft proposals as they come forward from the Commission and to influence them. This should be an opportunity given to all national Parliaments in member countries. They should have the chance to influence affairs before they begin to set in familiar lines which cannot be changed, at least by this House.
We must accept that the timetable is wrong. I hope that the Government will take note of the almost universal feeling that it should be improved, whether in the "one-step forward" fashion suggested by by my hon. Friend the Member for Saffron Walden (Mr. Kirk) or in the more radical way proposed by Commissioner Cheysson. Obviously, I would prefer the more radical way. Improvements must be made. This is not good enough. The speech of my right hon. Friend the Member for Knutsford (Mr. Davies) has made that devastatingly clear.
When we come to a line-up of the institutions or bodies which are interested in more spending and those interested in economy, the traditional set-up with which we are familiar is not to be found in the Community. The traditional theory of expenditure versus control of expenditure involves the spending of the executive—certainly it has excelled at that during these past few years; many would argue that it had lost control of the spending process—and control and restraint by this House.
I say "theory" because it is blindingly obvious that there has been a lamentable failure by the House to exercise the control and restraint which many of us believe is needed. I find it difficult to follow the idealised picture painted by the hon. Member for Birmingham, Handsworth (Mr. Lee) who talked of our marvellous voting procedure and its ability to exercise restraint upon public spending. As the hon. Member for Inver-

ness (Mr. Johnston) has said, it does not fit the facts. The spending processes here have soared out of control in a way that makes the action of the European Parliament and that of other member countries look much more effective.

Mr. Jay: At least the hon. Member will agree that we do not carry forward large amounts from one year to the next and switch them to quite different purposes.

Mr. Howell: We have a form of switching. We also have the bizarre process, as a result of not carrying forward, of having to hurry to spend everything we can before the year is out. That leads to some of the major nonsenses of our present budgetary process.
That is the theory of what happens in this country, but when we apply that kind of thinking to the Community situation it is different. It is rather unfamiliar, because there is the Commission, which has the duty and the right inclination and motivation to produce proposals for spending more. There is the Council of Ministers, which in relation to the budget for 1975–76 is wielding something approaching a Geddes axe over some of the proposals in the preliminary draft budget. In between the two there is the Parliament, pursuing a diplomatically wise middle way concerning the 1975–76 budget. At first glance the line-up is a very different one in the Community institutions as compared with Parliament and the executive in this country.
I shall deal with the way in which the Council, the Commission and the Parliament take up their positions when they deal with the 1975–76 budget, which is relevant to the future, and to the contribution we have to make. It is in a sense very strange that the Council of Ministers —the "Government" was so concerned with economy in relation to the 1975–76 budget. This is only because we are not used to our own Government or any Government being particularly obsessed by economy. One understands the Council's motives in seeking to economise and cut down the preliminary draft budget which it receives both from the Commission and from the Parliament.
A very interesting document was circulated by the Chief Secretary to the Treasury on 29th October 1974 explaining the Council of Ministers' point of view and that of the Government on the budget and the need for economy. I am unable to resist the temptation to read out one sentence from a document, signed by a Minister in the present Government, explaining why the Council has cut down the budget and what were the guiding principles:
Economies have been sought in the Community Budget comparable to those imposed by member states in their national budgets".
What economies, one wonders, were going on in the national budget of the United Kingdom at that time. I cannot remember any. I can remember a very rapid increase in the national budget of the United Kingdom and in the borrowing requirements. There were no economies here. Maybe there are now, but there were not then. But whether there were or not, at least in the Council of Ministers there was the spirit of economy to inform its deliberations, and that led it to some fairly radical and controversial proposals for cutting expenditure.
If that were to be the case in the future, we should have an odd situation in which the executive, in the sense of the Council of Ministers, was on the side of economy and the Commission and to some extent the Parliament were on the side of expenditure, and one would adjust one's views accordingly. But it may not always be like that. It might be like that for 1975–76, because member countries were all worried about the worldwide recession and the way in which their budgets got out of line following the oil crisis. As the hon. Member for Knutsford said, however, things will change. There will certainly come a time when the pattern becomes more comparable with the one we know here, in which the executive and the Commission plus the Council of Ministers will be the big spenders, and it will fall to the European Parliament and, to the extent that they can do it, the national Parliaments, to resume the rôle on which we have fallen down so badly nationally of restraining and controlling expenditure.
That, above all, is the reason why, when looking at the balance of arguments for and against more powers of

the European Parliament, and more opportunity for it to exercise control over expenditure, we ought to look less at what has happened over this last year, in which to some extent the rôles were slightly changed, and more at the almost certain developments in the future, when it will be very necessary indeed for the European Parliament to have stronger powers to operate over areas of the budget and to control and restrain. That is why all the proposals that are now in the air and coming forward for stronger auditing procedures, and for a body like our Public Accounts Committee at the European level, are wholly to be welcomed. The European Parliament would be most unwise to take the advice of anyone from this House who urged it to concentrate solely on developing Vote procedures of the kind that we have here.
We have found in the last few years that the one area in which we have made progress in controllng expenditure is through the updating of the methods and techniques and the Public Accounts Committee and its readiness to abandon the old "candle ends" approach and to begin to look at programmes and analyse them seriously while they are continuing, so that it can make comments before money has been spent rather than when it has long since been spent and no one can remember which Minister or civil servant was in charge of the programme at the time.
The European Parliament is wholly right—as are its members, if I may say so, as someone outside this process—to concentrate on building up the Court of Audit and the Public Accounts Committeee method. I urge it, when it does so, to make it a committee which is determined to look at on-going progress and which does not get bogged down, as our Public Accounts Committee was at one time—it is now much improved—in looking at detailed questions of how many paper clips were used in some programme, all fixed and wrapped up two or three years before, and producing long and turgid reports which Members are then understandably reluctant to debate because they all relate to things that no one can remember.
I hope that the European Parliament will develop the kind of Public Accounts Committee approach that we are now developing in this House and that it will


not get bogged down in the kind of procedures we had in the past, and which were so hopelessly inadequate for controlling, scrutinising and restraining the growth of public expenditure.
Finally I come to the question of claw-back and "additionality". This a very worrying situation and, quite frankly, I suggest that the Treasury has got it wrong. The concept of additionality is one that, I have always opposed. I agree with the comment of the hon. Member for Inverness that his starting point is that it is a nasty word anyway. I do not know whether the word "additionality" is in the dictionary, but one should always be suspicious of curious words and phrases like this and realise that nasty and complicated words usually disguise nasty and complicated thoughts and programmes. [An HON. MEMBER: "Devious"] The hon. Member regards the use of the word "additionality" as devious. That may be carrying the criticism a little far, but it is certainly complicated to the point of obscurity.
There are two aspects to it, one of which was touched upon by the hon. Member for Farnworth (Mr. Roper). The first is whether this is the correct approach. Clearly in the Commission it is thought not to be the correct approach. I can see the argument from the point of guardians of public spending, of which the Chief Secretary is the chief Minister responsible, that this is a very good way indeed of taking the heat off some of the grants handed out from the Treasury, or taking the heat off the burden on the Exchequer of the subscription to the European Economic Community.
Here is a marvellous opportunity for the Treasury to recoup large sums, either to continue paying out existing grants and support subsidies to bodies and organisations in this country, to forgo support from Brussels and use it to offset the subscription to the Community, or to use the grants and subsidies being paid out to bodies in this country and make up the difference with money direct from Brussels. Whichever way it does it, it must be an almost irresistible temptation, to those concerned with keeping down public expenditure by all means, to use this method.
I think, however, that the Treasury will be on very dangerous ground indeed

if it pursues this method. I regard it as dangerous ground for the reason that it undermines the contact between voluntary bodies, regional programmes, regional developments, the activities of ordinary people in public life, working hard in various activities in the regions of this country, and the living idea of Europe, Brussels and the European institutions. That is a very serious and dangerous thing.
This is a time when the major parties in the House and the House as a whole are committed to working to build up and strengthen Europe and the European idea. I know that there are hon. Members who think otherwise. The business of pocketing the difference by collecting the cash from Brussels and not passing it on, or collecting the cash, passing it on and refusing the grant from the Treasury correspondingly, undermines that important linkage. It is an anti-European practice and a bad one.
There have been reports in the Press which describe the way in which the EEC Social Fund is generating support which ought to go to various organisations and which describe the way in which those organisations have sought to apply to Brussels for what they believe to be their due and how, when they applied, they were told that the money had already been drawn for them and was already in the Treasury and had gone to swell Treasury funds. I imagine that the Chief Secretary will say whether those reports are accurate. If they are true, this is a very clumsy and secretive way of operating.
When the Treasury wishes to make known its need to control public spending, will it pursue practices openly and in a way that does not break the link between voluntary agencies and organisations in the regions of the European Community? Should it not be done in such a way that people understand the costs and benefits of this country being a member of the EEC, and in a way which maximises the impact of Britain and the organisations in this country in seeking and applying for our due from the various funds of the Community, especially the social fund? It would be absurd if as a result of this claw-back technique we were getting less than our due from the EEC simply to satisfy the Treasury's need to find some extra pocket


money to help it with the subscription to the European Community or to offset the grants and loans to local bodies.
The Treasury needs to look again at the additionality philosophy. It needs to be aware that the way in which it appears to be practising at present is hostile to the development of the EEC and to the development of this nation as a vigorous and effective member of the Community.
Those are just a few comments from someone who is neither in the executive nor part of the delegation to the European Parliament. Despite the timing of this debate, it has given us an opportunity —our first—to have a go at the Community budget. The House will want to have several more goes if we are to have effective control.

2.53 p.m.

Mr. Joel Barnett: With the leave of the House, I should like to reply to the debate.
The debate has been very interesting, and mainly non-controversial—except for the hon. Member for Guildford (Mr. Howell), who can never resist adding a little abrasiveness to our debates.
My hon. Friend the Member for Birmingham, Handsworth (Mr. Lee), in his nice way, as always, said that our debate had not been entirely useless. I am not sure whether I would put it precisely thus. I have found the contributions very helpful, and I shall study them carefully.
Given that there are a number of other matters, especially an important matter relating to shipbuilding which many hon. Members wish to debate, I hope that the House will forgive me if I do not deal in the greatest detail with every matter that has been raised and if I do not go through every one of the 591 pages of the batch of documents before us.
I heard with interest the remarks of the hon. Member for Cornwall, North (Mr. Pardoe). I had the feeling that he was less interested in the documents than in the size and content of a particular parliamentary delegation. He put forward a very interesting new idea in the suggestion that the members of that delegation should be selected on the basis of the size of their families. The House

will have noted that with great interest. It will also have noted the way in which my hon. Friend the Member for Farnworth (Mr. Roper), who is probably the one Member among us who has read every word on the 591 pages of these documents, immediately picked up the hon. Member for Cornwall, North on a small point in relation to that matter.

Mr. Pardoe: Does the Chief Secretary accept that if our delegation is paid more than other delegations, it enters in the right side of our balance of payments? Therefore, it is very important that we should send people who will gather large family allowances.

Mr. Barnett: I hope that I may stick to the more serious part of the debate.
I turn to the points made by the right hon. Member for Knutsford (Mr. Davies) and my hon. Friend the Member for Newham, South (Mr. Spearing), and many others, about the procedures for dealing with matters that come from the Community. The right hon. Member for Knutsford fairly made the point that there were many issues outstanding for debate and that great problems arise here. He knows that it is not a matter for me as to when time should be made available in the House for various debates. However, it is a fair point, which I shall bring to the attention of my right hon. Friend the Leader of the House.
We should recognise that successive Governments have been faced with this appalling problem of finding within our parliamentary timetable time to debate the documents coming from the Community and all the other matters which we want to debate in relation to our own affairs in Britain. Nevertheless, I entirely take the point. I hope that we shall be able to find a better way of dealing with the various Community documents.
My hon. Friend the Member for Newham, South was also concerned about the fact that this debate is on the Adjournment rather than on a "take note" motion. I recognise the point, as I am sure has my right hon. Friend the Leader of the House. However, on this occasion, given that we are debating documents, which regretfully, for the reasons that are known, are six months in arrears, I do not believe that the question whether we are having this debate on


the Adjournment or on a "take note" motion is a matter of great moment. Indeed, there is something to be said for allowing the kind of wide-ranging debate we have had today, which includes some matters which are not in the documents, by debating this matter on the Adjournment.
The hon. Member for Guildford said that we must get back to the powers of control and restraint by Parliament. In my brief period as Chief Secretary, it has not been my particular experience that Members of the European Parliament are necessarily most concerned with restraining public expenditure. It is rather the reverse. That was my experience. That was what I found.
I now refer to the question of control. I do not pretend, despite our long experience, that we have devised perfect methods of control over expenditure which entitle us to lecture either the Community or anyone else on how they should run their affairs. There is something to learn from the Public Accounts Committee, which has existed for a long time. However, our affairs are not so perfect that we cannot learn from the ways in which the Community seeks to improve its affairs.
The hon. Member for Saffron Walden (Mr. Kirk) raised a number of points concerning the obligatory and non-obligatory areas. Although it sounds a technical matter, it is not. This deals with important questions of powers between the Assembly and the Council. The hon. Gentleman may genuinely misunderstand one point. He said that as the social fund came within the non-obligatory category so should the regional fund. I do not comment on that. That is still a matter under dispute between the Assembly and the Council. It has not yet been resolved.
The guidance section is obligatory as there is a fixed limit on annual expenditure of 325 million units of account. The amount of social fund expenditure is decided each year by the budget Council. That is the reason that the expenditure is non-obligatory. The Council fixed a figure for the regional fund. Therefore the two are not identical. However, I do not want to become involved in a dispute between the Assembly and the Council of Ministers which will no doubt

be settled in the not-too-far-distant future.
There was a misunderstanding about my supposed acceptance of supplementary budgets. As someone who has, unfortunately, had to sign a large number of supplementary budgets in the past 16 months, I am not fond of them, as I think many of my ministerial colleagues are aware. I do not allow supplementary budgets to go through in the way some might think.
There is a misunderstanding here. There is a distinction between the kinds of supplementary budget. There is the supplementary budget which indicates weak financial control. That type of supplementary budget should be avoided at all costs. There is the other kind, when new policies are brought forward. There the situation is difficult.
I instance the regional fund and the Cheysson measures. In this case much larger sums were proposed than were eventually agreed. The hon. Gentleman said that he would have preferred to include the amounts in the budget, even if they were not spent. In my experience, once we put amounts into a budget there are considerable dangers that they will be spent. We must be careful about that. I felt that it might be better, for the purposes of control, to include supplementary budgets rather than to enter amounts which had not been agreed into the Original budget. The inclusion of sums, for which the policies had not been decided, into a budget would lead to sloppy budgeting and bad financial discipline.

Mr. Kirk: This is an important point. The figure which we wished to write into the budget last October was finally written into the supplementary budget. Commissioner Thomson made it plain that he cannot spend the money, anyway. The amount we entered was too large. The difference in the case of the regional fund is virtually non-existent.

Mr. Barnett: That may be so but I was dealing with the general question of supplementary budgets.
For the reasons which I have given, there is a great deal to be said for supplementary budgets resulting from new policies. We have a lot to learn. I do not pretend that either the Community or the Government are perfect


in our way of dealing with this complicated area of new policies, especially as the Community is learning as it goes along.
The hon. Gentleman's next point concerned carry-forwards. He thought that carry-forwards were undesirable from the point of view of control. Treasury note 2EC 51/07, answers this point. Paragraph 14i, reads:
For some Community budget expenditure programmes a fairly long period of time is necessary to provide for the authorisation of the disbursements of expenditure agreed in any one year's budget. The Social Fund is a case in point.
It is difficult to know for certain that we shall be able to spend the funds in that the time without a carry-forward.
The hon. Member for Guildford correctly made a point in answer to an intervention. If there are no carry forwards there would be a danger, which applies at local government level, of an enormous and irresistible temptation to spend the funds regardless of whether it would be better not to spend them. We might look more closely at the idea of carry-forwards—we may have something to learn from it—but I do not accept the hon. Gentleman's basic argument that carry-forwards are bad per se.

Mr. John Davies: Perhaps the right hon. Gentleman will also give us the benefit of his views on the difference between sums carried forward and committed and sums carried forward and uncommitted. "Expended" does not cover the whole problem in relation to any year's budget; it is the commitments which play the important part.

Mr. Barnett: I am sure that the right hon. Gentleman is right. I am not trying to pretend that it is the whole problem. Matters of accountancy and budgeting are never simple. All I am saying is that I am glad that the hon. Gentleman is not implying that carry-forwards per se are bad. I do not think that they are.
I agree with all hon. Members who have spoken about the need for a timetable. We in the House should have the opportunity to debate the budget before it is settled. The interesting suggestion was made of debating the maximum rate, which is known in May. We hope that

we shall not need to do that because the budget will not by then be available. It would give the opportunity for debate and, although it is often helpful for us to have a debate in advance of the budget being settled by the Council of Ministers, it would be much better to have the debate when the budget is out. We are talking of getting the budget for 1976 out in June 1975. The collation of the information from the various areas is not simple, and considerable problems are involved in getting the budget out earlier.
I know that Commissioner Cheysson is very much in favour of getting the budget out earlier for reasons which I have put to him and to the Council of Ministers. I hope that we shall be able to get to that position soon.
I marvel at and admire the extent to which my hon. Friend the Member for Farnworth goes into the detail of EEC documents. I have enormous respect for my hon. Friend. When he said that he disagreed with my statement that the budget was only a forecasting exercise, I was a little concerned, until he went on to say that I was probably right and that it was a technical matter, although an important one. I do not pretend that it is not an important matter. Of course it is important.
My hon. Friends the Members for Newham, South (Mr. Spearing) and Birmingham, Handsworth and the Member for Scarborough (Mr. Shaw) were concerned about the best way of improving the detection of fraud. Several questions were asked about how we dealt with fraud in relation to our expenditure. I assure hon. Members that expenditure in this country in connection with the Community's agricultural fund is subject to the same safeguards against fraud as is expenditure by the Exchequer. It is subject to the usual procedures of departmental audit, independent investigation and audit by the Comptroller and Auditor-General, and it is brought before the Public Accounts Committee. There is a careful check on the expenditure although, I hasten to add, I never pretend that we have the procedure absolutely right. We have to go on refining and trying to improve it.
My hon. Friend the Member for Newham, South has a persistence in these matters that makes him a marvellous Member of Parliament. He goes into


matters of detail, as he did this morning as regards milk. I hope he will forgive me if I leave that matter to be dealt with by an agriculture Minister in the not-too-distant future. I shall ensure that the points that my hon. Friend has raised are brought to the attention of the appropriate Minister.

Mr. David Howell: I hope that the Chief Secretary will say something about clawback and additionality in terms of the newspaper reports on this subject.

Mr. Barnett: On the question of the newspaper reports about the social fund, there may well be some misunderstanding. As I think the hon. Member for Saffron Walden will know, money is not handed out from the social fund quite that easily. Although the newspaper articles may not have the facts absolutely right, I would not wish to criticise them any more than that, save to say that payments from the social fund are made in accordance with strict rules that take up to two years to go through. It is difficult to see how the fund could provide the kind of urgent hand-out assistance that the reports suggest are needed by the organisation referred to—namely, the Industrial Therapy Organisation.
Additionality has been mentioned by several hon. Members, including the hon. Member for Inverness (Mr. Johnston). There are very few member States which have made their position absolutely clear. We are still considering the position and we have not yet come to any conclusion. I note the position of the official Opposition in that they want us to spend an additional amount. I shall take that into account in our deliberations.

Mr. Laurie Pavitt: I beg to ask leave to withdraw the motion.

Motion, by leave, withdrawn.

Orders of the Day — EUROPEAN COMMUNITY (SHIPBUILDING)

Mr. Deputy Speaker (Mr. Oscar Murton): Before I call upon the Under-Secretary of State for Industry to move the motion in the name of the Prime Minister and his right hon. Friends, it is my duty to inform the House that Mr. Speaker has not selected the amendment in the name of the right hon. Member for Battersea, North (Mr. Jay) and his hon. Friends.

Mr. Douglas Jay: On a point of order, Mr. Deputy Speaker. You have just informed the House, Mr. Deputy Speaker, that the amendment in the names of my hon. Friends and myself has not been called. Is it not rather unfortunate from the point of view of the control of these activities by the House, a matter which has been emphasised today, that we should not have the opportunity, if necessary, of taking a vote on the amendment as well as on the motion?

Mr. Deputy Speaker: That is not a matter for the Chair. Mr. Speaker's discretion is absolute.

Mr. Nigel Spearing: Further to that point of order, Mr. Deputy Speaker. Will you draw the attention of Mr. Speaker to paragraph 27 of the report of the Select Committee on Procedure on European Legislation, where it specifically states:
Simple take note Motions are more easily susceptible of amendment in many ways, for example by amendments leaving out the words 'take note' and inserting 'approves' or 'disapproves', or directing the Minister to insist on certain changes in the proposal at the Council.
Unless back-bench Members have the opportunity of moving amendments that have been selected by Mr. Speaker, I hope that Mr. Speaker will understand that that paragraph becomes non-effective.

Mr. Deputy Speaker: As I understand it, the Committee's Report has not yet been considered by the House.

3.13 p.m.

The Under-Secretary of State for Industry (Mr. Gerald Kaufman): I beg to move,
That this House takes note of Commission Document R/1362/75.


I trust that I shall be able to move this motion to the satisfaction of my hon. Friends. I hope that they will find that they are able to take note of it and that they will find that they would not have wished to move their amendment.
I might add that my right hon. Friend the Chief Secretary to the Treasury has just had cause to bifurcate upon inaccurate Press reports. I repeat to the House what I said earlier on the points of order—namely, that the Press report in yesterday's issue of The Times relating to the motion was not accurate. That being so, the motion and this debate are both necessary.

Mr. Russell Johnston: If I recall the matter correctly—unfortunately the hon. Member for Renfrewshire West (Mr. Buchan) is not present—it was indicated that it was not only the report in The Times but the fuller report in The Scotsman with which he was concerned.

Mr. Kaufman: I have not had the benefit of seeing the report in The Scotsman, which could only be superior to the report in The Times. If the report in The Scotsman chimes in with that in The Times but in a lengthier version, I fear that it will be as inaccurate as that which has appeared in The Times.
As hon. Members will be aware, the Scrutiny Committee has recommended that the EEC Directive on Aids to Shipbuilding should he debated on the Floor of the House. Those hon. Members who are familiar with the Commission's earlier proposals a year or so ago and with the points we raised at the time will, I am sure, agree that the text we have before us today meets most of our objections. But as the House will know, the Government are deeply concerned about the serious over capacity situation, the declining orders in the international market for ships and the implications for the future of shipbuilding in this country. I, therefore, welcome this opportunity to hear hon. Members' views and to explain why we are recommending that the directive should be adopted.

Mr. Norman Buchan: I am not sure whether this matter should be raised as a point of order, but we are discussing a "take not" matter,

not whether the Government should urge us to support it. That was exactly why I raised my point of order a little earlier.

Mr. Kaufman: I accept what my hon. Friend said. Her Majesty's Government are not recommending in the motion that the directive should be adopted by the House. The situation is that, having heard the views of the House, we shall go forward to recommend that the directive be adopted by the Council of Ministers when it meets in a few days' time. The situation is that this House now has an opportunity to debate this directive before it is finally considered and is adopted by the Council of Ministers in a few days' time.

Mr. John Davies: On a point of order, Mr. Deputy Speaker. I should like to have your guidance. The Minister has underlined the fact that we are involved in a take-note motion, but he began his speech by saying that the Government approve the instrument. On former occasions when the Government have approved of an instrument and want the House to vote upon it, they have tabled a motion to approve and it is open to hon. Members to disagree. I hope that you will seek to protect hon. Members in this matter. In this case it would have been appropriate to table an appropriate motion.

Mr. Deputy Speaker: The question of a "take-note" motion or the form of any motion which is in order is not one for the Chair. The Government's attitude to a particular matter is a matter for the Minister.

Mr. Douglas Jay: Further to that point of order, Mr. Deputy Speaker. Does this not illustrate the point I was making—namely, that in these conditions it is impossible to indicate a view or to reach a decision? In these circumstances will you reconsider your decision not to call the amendment?

Mr. Deputy Speaker: Mr. Speaker has already come to a decision on that matter.

Mr. Buchan: Further to the point of order, Mr. Deputy Speaker. I apologise for taking up time in this short debate, but an extremely important point has been reached. We are not dealing with the simple point whether the amendment


should be taken but with the whole character of the proposition put before the House and whether the situation has been changed by the Minister's statement. The Minister began his speech by saying that he was seeking to show why we should approve of the directive, and he went further and said that it would act as guidance for British Ministers in Brussels.
I believe that the proper course, in procedural terms, would be for Mr. Speaker to be consulted, or for the Minister to decide that he should withdraw the order, at least until Monday, so that he may consider whether he wishes the House to debate and decide the issue, with the idea that the approval of this House will give guidance to the Minister in Brussels.
This is an important matter. It was inevitable that we would have to deal with this relationship at some point following the decision to enter the EEC, and these matters cannot be solved by minor ad hoc points of order. The Minister could withdraw the order and and enable hon. Members to examine it under proper conditions and then either approve or disapprove.

Mr. Spearing: Further to that point of order. If my recollection is correct, this is the first time that the House has debated or is likely to come to a decision on a specific motion since the referendum. During the referendum campaign it was constantly stressed that both Ministers and the House would have control and have their say on what was said in the Council of Ministers. From the exchanges that have taken place between the right hon. Member for Knutsford (Mr. Davies), my right hon. Friend the Member for Battersea, North (Mr. Jay) and my hon. Friend the member for Renfrewshire, West (Mr. Buchan), it is obvious that the position is not at all clear. Therefore, Mr. Deputy Speaker, I ask you to reconsider the earlier decision and to support my right hon. and hon. Friends in their submissions. Unless the matter is cleared up, the power of the House in respect of instructing Ministers at the Council of Ministers will be unclear, and that will be contrary to the pledges that were given by the Government prior to the referendum.

Dr. J. Dickson Mabon: Further to that point of

order. I do not share the view of my hon. Friend the Member for Newham, South (Mr. Spearing) that we should disapprove of this motion. I hope that we shall simply take note. The Under-Secretary implied that if there were any qualifications within the directive—and I should certainly like to mention one—he would be willing to pass this on so that the matter could be raised at the Council of Ministers and thus influence the finality of the directive.

Mr. Kaufman: I am fully cognisant of and greatly sympathetic with the views of my hon. Friends and the right hon. Member for Knutsford (Mr. Davies). We should be extremely careful in the way in which we handle this business. Having taken the view that I held up to the referendum, it would be inappropriate and slightly hypocritical of me if I were now to take a contrary view. I assure all hon. Members that, by coming before the House on a take-note motion, I do not assume that if that motion is accepted it thereby involves the approval of the House. If I were to do so, then indeed not only would I be in some contempt of the House—which I certainly would not seek to be—but I should not be behaving consistently with the views that I have held on these matters for a considerable time.
I in no way resent the points of order that have been raised. Indeed, far from resenting them, I think that right hon. and hon. Members have been absolutely right to make their points at this time so that we can all be perfectly sure of the basis upon which the debate is being conducted. I should like the House to understand that it is not the intention of Her Majesty's Government, and certainly not my intention, that we should take more out of the debate than a take-note motion would justify. I hope that all hon. Members will accept that assurance and allow me to proceed to explain the directive, because some hon. Members have expressed concern about it.
I shall now explain the purpose and scope of the directive. It may be asked—it is certainly a question that I should have asked as probingly as I could—why do we need a directive on shipbuilding at all? From our point of view, and I am sure that of other member States, the best argument for a directive is its permissive nature. It does not restrict


our powers. It legalises aids which are being given and which might otherwise be prohibited. Article 92 of the EEC Treaty prohibits State aids which may distort competition, other than those listed in paragraphs 2 or 3. The exceptions listed in sub-paragraphs 3(a) to 3(c) include aids to promote the development of special areas and of certain economic activities, such as aids given under Section 7 of the Industry Act in the United Kingdom.
The Shipbuilding Directive is made under Article 92(3)(d) which allows the Council to add other categories to those already listed. Its effect is to widen the list of exceptions to the general prohibition of State aids contained in Article 92, but it does not preclude us from proposing to the Commission additional aids if the need arises.
In the absence of a directive, all aids to shipbuilding will have to be justified under the Treaty of Rome. For instance, we would need to seek approval for our Home Credit Guarantee Scheme. This does not mean that any directive will do and, throughout our negotiations in Brussels, we have endeavoured to explain our point of view and to ensure that our shipbuilding industry could continue to get the support it needs to safeguard its position among shipbuilding nations. The market for ships is an international one and the directive is not particularly concerned with competition in intra-Community trade in ships, which is not very significant. Its aim is to place all EEC shipbuilders on an equal footing to compete in the world market.
This directive, like its predecessor, takes account of international agreements to regulate aids made under the OECD, to which all EEC member States have subscribed. They have been working effectively since their introduction in the late 1960s and all the signatories have expressed their strong wish to uphold them against the background of deteriorating order books and intensifying competition.
There is a long history of support given by Governments to their shipbuilding industries, culminating in a subsidy race in the 1960s when Governments tried to outbid each other in order to maintain or increase their share of the market. In

1969, OECD shipbuilding countries signed the Understanding on Export Credit for Ships, which was a major and successful step towards orderly marketing and fair competition on equal credit terms. In 1972, the same nations undertook to remove progressively all obstacles to normal competitive conditions in the world market for ships under an OECD agreement known as the General Arrangement.
This provides, among other things, that direct subsidies to shipbuilding should be eliminated by 1975 and that no new aids specific to shipbuilding should be introduced. The General Arrangement has worked well and discussions are proceeding on what further steps could be taken, bearing in mind the problem of over-capacity. Naturally, all Governments, including Japan, which now has a 50 per cent. share of world output, are deeply concerned about the difficulties ahead and particularly the dangers inherent in fierce competition.
Neither we nor the other EEC countries want to breach our obligations unilaterally by increasing our aids to shipbuilding. That is not the way to deal with the problem. Together, we shall discuss with Japan and other major shipbuilding countries in the OECD what measures can be taken in the common interest.
It is against this background that we must examine the purpose of the directive. It deals essentially with four subjects—direct building subsidies, Government assisted credit, investment aids and rescue of companies in difficulties.

Dr. Dickson Mabon: My hon. Friend has referred to the OECD compacts on these matters. Surely he is not implying that Japan is associated with these?

Mr. Kaufman: I shall be coming to the question of Japan before I conclude. If I do not, perhaps my hon. Friend will remind me.
Article 2 of the directive provides that direct subsidies for the building of ships may continue until the end of 1975 when, with certain exceptions, they must come to an end. I think it is with this provision that the amendment proposed by my right hon. Friend the Member for Battersea, North (Mr. Jay) and others is concerned.
Although the amendment has not been selected for discussion, it is right that I should speak on the points it raises. It refers to the elimination of direct building subsidies to the United Kingdom shipbuilding industry by the end of 1975. However, these subsidies have already been eliminated. Subsidies were given to the industry under the name of construction grants in the three years from 1972 to 1974 by virtue of Section 11 of the Industry Act 1972. There was no provision in that Act for the subsidies to be continued beyond the end of 1974 and we have not considered it appropriate or necessary to undertake the legislation which would have been required if construction grants were to go on. They have, therefore, come to an end. There is no direct building subsidy in respect of work done in shipyards after the end of 1974. So the directive does not affect our position one way or the other.

Mr. Spearing: I appreciate what my hon. Friend said, but is it not true that if in the future some Government wishes to reactivate or relegislate on that point, as the Conservatives did with the Industry Act, under the terms of this directive we should be ultra vires in doing so?

Mr. Kaufman: I accept that. That is one of the consequences of being a member of the Community. From a practical point of view, however, which must be adopted in these circumstances, since we do not intend to have this kind of subsidy we are not inconvenienced by not being allowed to have it. I cannot go further than that, and I hope that my hon. Friend will take my point.
Some observers seem to take it for granted that our shipbuilding competitors outside the EEC give direct subsidies to their shipbuilding industries. In fact, generally speaking, this is not the case. There are very few countries that subsidise shipbuilding directly. I may mention the United States and Canada, which provide large subsidies to offset their high labour costs, but these countries scarcely compete in the international market and they are far down the scale of international shipbuilding. The United States is well down the "top 12" and Canada is not even in it. Indeed, in the United States subsidies are available only for ships to be registered under the American flag.
So far as I am aware, there is no other major shipbuilding country which gives a significant subsidy. Certainly there are no direct subsidies in Japan which produces half of the world's ships, or in Sweden, which is our next largest competitor. I do not think it can be said, therefore, that in this respect the directive will have any adverse effect on the competitive position of the United Kingdom shipbuilding industry.
I must emphasise, however, that the Government provide substantial assistance to our industry by other means. Most of the industry is in assisted areas and is eligible for the full range of regional aids. I will come to that in a moment but I should like to note, at this point, that the directive does not affect our power to give this regional assistance.
More specifically, I should like to deal now with the matters covered by Article 3 of the directive, that is to say, credits for home and export sales. Credits for export sales are provided by ECGD. Credit for sales to United Kingdom shipowners are provided by the Department of Industry through the Home Credit Scheme for Shipbuilding.
The credit terms are governed by the OECD Understanding on Export Credits for Ships—which we apply to home sales also—and, like our main competitors, we have voluntarily subscribed to this Understanding. The directive makes it clear that such credits may continue. This is of very valuable assistance to the United Kingdom shipbuilding industry because our arrangements are such that any shipowner, provided his credit is good, can be assured of getting finance from a bank to cover 70 per cent. of the cost of a new ship from a United Kingdom shipyard.
The Government have arrangements with the banks, which have been described in the House, whereby the banks are refinanced when their lending exceeds a certain limit. Consequently, there is no need for them to limit the amount of credit they provide for ships. Although we comply fully with the terms of the OECD Understanding, I may say that in this respect our arrangements are probably better, from the shipbuilders' point of view, than arrangements in many other countries where the finance may be much more difficult to obtain. There is a considerable cost to public funds in providing this assistance to the industry and


it must not be ignored in comparing our own measures with those available abroad.
I should also mention at this point, perhaps, the scheme of cost escalation insurance which we have just introduced. This applies to ships built for foreign owners, as it does to other exports of capital goods, and I hope that it will be of further assistance to the shipbuilding industry. Some hon. Members may wonder why it is not mentioned in the directive whereas the French scheme of cost escalation insurance is referred to in paragraph (b) of Article 2.2. The reason is that our scheme is not specific to shipbuilding whereas the French scheme is—that is to say, the French scheme for ships is somewhat different from their scheme for capital goods in general. Therefore, their scheme needs specific mention in the directive and ours does not. Taking all this together, I think I can say that the directive will not require us to change our policies in a way that would be disadvantageous to our industry in relation to competition from outside the EEC.
Article 4 provides for the regular supply of information on decisions to grant aids to investment in shipyards. The Commission's earlier proposals, which we opposed, provided for aids to new investments to be notified to the Commission in advance, so that it might decide whether they were compatible with the shipbuilding policy. In the new version, these aids would be notified post facto and the information collected by the Commission discussed with member States in order to arrive at joint guidelines for Community shipbuilding. We have every intention in this difficult period of co-operating with the Commission and with our partners on this question.
Article 5 deals with emergency aids to companies in difficulty, which would have to be notified to the Commission in accordance with the EEC Treaty.
Before I conclude there is one point I would like to make about the scope of the directive, relating to regional assistance. I know that many hon. Members are concerned about the difficulties our shipbuilding industry will be facing in the next few years as a result of the deteriorating market situation. I know that they are also concerned that we should

retain our ability to safeguard our expertise and the jobs of those who have invested their life's work in shipbuilding.
But we should not forget that our shipyards are concentrated in assisted areas and will continue to benefit from the regional aids available to all industries in these areas. These aids are not specific to shipbuilding. They are general, and as such fall outside the directive. We have established quite clearly that a directive about shipbuilding cannot preclude Governments from granting aids to enterprises for regional development purposes. Our aid policy in this respect would not, therefore, be affected. We have nevertheless undertaken to provide such information as we can to the Commission about assistance to investment in shipyards, because we feel that this is important for the development of a Community shipbuilding policy.
But when the bulk of our shipbuilding industry comes under public ownership—the Government have made clear their intentions in this respect—neither the Treaty of Rome nor this directive will hinder us in any way from investing in our shipbuilding industry, from increasing its efficiency and, therefore, its competitiveness. One of the first tasks of the organising committee, when it is set up, will be to consider future investment. While we would expect it to take fully into account the international market situation and demand forecasts, there is nothing in the directive which would prevent it or the public corporation which will manage the industry from taking any decisions they think fit.
Clearly the directive will not solve the problems of our shipbuilding industry. It will not dissipate the effects of overcapacity and lack of orders. It is not its function to do so. The purpose of the directive is to legalise and regulate aids and to provide a basis for discussions with member States on a possible Community shipbuilding policy. It is the Government's opinion that these modest objectives strike the right note at this juncture.
Except for some minor details, agreement has now been reached with our partners in Brussels on the text of the directive.
I ask the House to take note of the Commission's proposals and to allow the Government satisfactorily to conclude their negotiations in Brussels so that the directive may be adopted at the earliest possible time.

3.39 p.m.

Mr. Tom Normanton: I thank the Leader of the House for including this item for debate today, but I express my deep concern, which is widely felt, at the absence of sufficient active interest in the substance of the debate.
The debate is undoubtedly welcome, because the House has, probably for the first time, an opportunity to make its views known to the Government and the Community before decisions are taken by the Council of Ministers. As we heard in the preceding debate, the House invariably deals with what are virtually death certificates rather than birth certificates. This is an opportunity for the House to be in at the beginning of what may well be an extremely valuable contribution to the well-being of a major industry of this country and of the Community.
Before I comment on the contents of the Commission's paper, it might be of assistance to right hon. and hon. Members who may be more familiar with procedures in this House than with those which operate in the Community if, as a Member of the European Parliament, I were to paint the picture which operates in the European Parliament in relation to this proposal.
I stress that the role of the Commission is not to make decisions which are binding but to make proposals for directives which, after having received approval by the Council of Ministers, only then become binding. Coupled with that obligation is the requirement to engage in the most comprehensive consultation which I, in my short service at the European Parliament, have ever seen. The consultation is with Governments, industrial organisations, trade unions and any parties which might be affected by the proposals in so far as those parties are willing to present their views.
The next stage, which is related to the stage of consultation, is to prepare draft proposals. It is appropriate that we are debating a draft proposal, not a proposal which at this stage need necessarily be seen as a binding obligation.

Mr. James Kilfedder: The hon. Gentleman has referred to widespread discussion. Can he say whether, for instance, the trade unions in Belfast shipyards have given their wholehearted support to this draft directive?

Mr. Normanton: I do not know whether the trade unions in Northern Ireland are directly linked with the trade union representation in the Community. If they are not, I venture to suggest that the fault does not lie in Brussels with the Commission but that it lies mainly with the trade unions in either a part of this country or the trade union movement in this country prior to our total commitment to the Community.
After the draft has been prepared, the next stage is for it to be submitted by the Commission to the European Parliament. When it is formally presented, that Parliament decides to submit the proposals for detailed scrutiny to the appropriate committees.
This proposal has been before the Economic Affairs and Monetary Policy Committee and the Social Affairs Committee. It has received the most detailed, exhaustive and questioning discussion by the Commissioners responsible for social affairs and shipbuilding. This process lasts for seven months. Only then is the Commission's proposal brought back to the European Parliament in plenary session for a full and comprehensive debate in the presence of the Commissioners responsible for all aspects of the policy and—this is extremely important—in the presence of the representatives of the Council of Ministers which ultimately has to take the final decision.
In other words, the process of consultation, discussion and exchange of views is exhaustive. It is one which this House would be well advised to consider, carefully to examine and perhaps adopt. Only after the Parliament has made its views known do they go back, together with any modification, to the Council of Ministers, which decides whether to accept or reject those proposals. Even after a rejection by the Council, parliamentarians of all countries are never backward in coming forward to make sure that pressure is put upon the Commission as a collegiate body and the Council of Ministers through the President of the Council who attends the sittings of the Parliament.
I come now to the Commission papers which are before us. The first proposal was published in December 1973. At that time shipbuilding order books stood at a record level. Indeed, they were over-full. At that time inflation was running at what we regarded as a record all-time high of between 6 per cent. and 10 per cent. The Arab-Israeli conflict had ended only three months earlier, leaving us with economic and energy crises.
Today we are in a different position. Order books are collapsing internationally. We hear daily of the cancellation of orders for tankers. Fortunately for this country some shipbuilding yards have been engaged in oil rig and ancillary service construction work. Inflation is still serious in Europe but in Britain it is calamitous. The world economy is hovering at a dangerously low level. In Britain we are witnessing the frightening consequences of our various methods of helping our shipyards to deal with their many and varied problems. Only yesterday we read of two yards which were running out of cash. This has happened in many sectors containing the older-established industries.
Commissioner Spinelli is responsible for industrial policy. During a debate in the European Parliament he spelt out this interpretation of the objectives he sees underlying the proposal we are debating. He said:
the aims of a Community shipbuilding policy are competitivity and balance. In this sector, competitivity means being capable of holding one's own in the face of strong international competition without public assistance, which has been granted by almost all the Member States for some decades. Balance requires developing the shipyards in such a way that investment grows in step with demand so that crises of overproduction do not occur.
That was how Commissioner Spinelli saw this proposal.
The Commission is anxious to receive advice on structural changes as well, and I place on record that we, the members of the European Conservative Group, joined with the Socialist Group in the European Parliament in pressing upon the Commission what we felt was a crying need for a directive on structure, but this was strongly resisted by Mr. Spinelli. He felt, I think rightly, that it was difficult enough for the Governments of the

nine member States to reach agreement on the area of aids and that to try to find common acceptance of a policy on the restructuring of a major industry was extremely difficult—we had to concur with this—and posed insuperable problems. It was on those grounds that both the Socialist Group and the Conservative Group in the European Parliament withdrew their insistence on the need for a directive on structure.
The House, however, will note that there are several Community instruments available to help facilitate change—and change there must be if the economy of any country or the industry of any country is to prosper.
It is appropriate in this context to mention the European Investment Bank, the Community Social Fund, the Community Regional Fund and the Community Research Fund, which are beginning increasingly to play a crucial role in selectively stimulating change in the field of technology as well as structure. But I am sure that the House will not underestimate the difference in bargaining power of the Community in international negotiations as compared with the bargaining power of any one State. Whereas much of the work concerning aids has been conducted on an international plane through the medium of the OECD, I hope that the Government will, with the Community, press for a continued emphasis upon the need for wider negotiation in dealing with the problems of the shipbuilding industry, not only in regard to aids, which have made considerable progress in the last 10 years, but in the structural sense as well.
I should like to put some questions to the Minister, to which I hope he will be able to reply when he winds up the debate. First, will the Government assure the House, now that they are committed to active and, I hope, highly constructive participation in the workings of the Community, that they will make time in the parliamentary timetable for the views of this House, as opposed to the views of the Government, to be voiced at the formative stage of Commission drafting? I assure the Minister that the Commission is a highly receptive audience of our views at all times. Apart from this, Members on both sides of the House would be the better able to participate in the intensive work to which


we are looking forward in our involvement in the now completed European Parliament.
Secondly, do not the Government agree that the solution to the problems of major industries like shipbuilding is best found on a Community basis rather than by each member State trying to go it alone?
Thirdly, will not the Government agree that where all sectors of industries are in receipt of aids, no one is in receipt of aids—in other words, that what is important is selectivity and extreme care in administering aids, in whatever form. In my judgment, the only criterion which can possibly be accepted, is competitive capability. This can best be achieved by a policy of high capital investment in machinery and a similarly high investment in skilled manpower and advanced technology. Only an industry which has a combination of those things—a highly intensive concentration of machinery, a very advanced technology and highly skilled manpower—can have any future. That applies to any industry, and especially to shipbuilding.
When does the Minister expect this proposed directive to come into effect? As existing measures lapsed, I believe, on 30th June, what is the legal position in this interregnum?
The House will no doubt have been made aware of the views of the shipbuilding industry. It has generally expressed its satisfaction with the directive in its current version, but it has expressed concern, to which the Minister has referred, about the need for consideration of the 2 per cent. shipbuilders' relief. Will the Minister indicate his recognition of the importance of this and say what particular measures the Government have in mind to deal with the murderous, cut-throat competition in international shipbuilding and selling which is rapidly developing?
Lastly, will the Minister assure the House that the Community will resist any move to dismantle aids to any shipbuilding industry in the Community unilaterally? We feel that this is a process which is desirable and towards which we must work but that to do so now unilaterally in the world of international trade could be highly prejudicial and would be thoroughly unacceptable to the British shipbuilding industry.

3.57 p.m.

Mr. Norman Buchan: I want to start by commenting on the reasons for our amendment, which I regret has not been selected, and stressing that my anxiety on that score has not been relieved by the Minister's later remarks, although I understand his anxiety to try to set our minds at rest on this matter.
However, as I understand it, he ended by saying that the importance of this debate arises from the fact that, among other things, in a few days' time our representatives in Brussels will require to know the mood and the attitude of this House. I do not take this to refer to peripheral points but as a reference to the directive as a whole. Nothing in the Minister's speech suggested anything to the contrary. It was a general speech in approval of the document, and not a speech in explanation of it.
I take entirely the point made by the right hon. Member for Knutsford (Mr. Davies), who has done more than any other individual in the House to try to secure the right kind of scrutiny and that the right kind of decisions are made thereafter in this Chamber. On this very first occasion we are in grave danger of creating the precedent whereby, whatever we may think of this particular directive, a decision in this House on a take-note basis may be interpreted as a declaration of approval. The rejection of that view does not alter the situation. It is not enough for the Minister now to say that it will not be taken in this way. The whole tenor of his speech and the way in which the Government have approached the matter suggest that this is how it will be interpreted. I know the Minister's anxiety now to reassure us, but his whole approach is the reason for our anxiety, and not his later remarks. That is the problem.
The second matter is the point we raised on points of order earlier today. I shall read reports in The Times and The Scotsman. The version in The Scotsman is longer, and is highly specific. Yesterday The Scotsman said:
Originally the commission had hoped that member governments would agree to reduce their shipbuilding aids to certain maximum levels over a set period. At the same time they demanded prior approval of any new state aids to shipyards"—


not just notification—
but under pressure from Britain and other EEC members the commission climbed down from an interventionist approach to the more flexible set of rules which the Nine have now approved.
What rules have been appoved? Has the directive been approved? What position do we now face? That is an extremely circumstantial statement in The Scotsman.

Mr. Kaufman: It is important that I intervene at this point as we are being asked a "Have you stopped beating your wife" question. My hon. Friend asks what has been approved. I cannot tell him, as nothing has been approved. It is important to emphasise that the report in The Times, presumably echoed at greater length in The Scotsman, is wholly inaccurate.

Mr. Buchan: I have seen many leaks, distortions and inaccurate stories, but I have seen very few reports which contained as many circumstantial points as this one. However, I take the Minister's point, although I shall look for corroboration in the future.
The Scotsman says:
The new rules, which are contained in the so-called Third Directive on the co-ordination of the Nine's aids to their shipyards, make clear that member governments will continue to be free to nationalise shipyards. At the insistence of the Italians, a paragraph has been added to the commission's text clarifying this point.—Times Foreign Service.
Is the Old Thunderer completely wrong? It is not usual to make statements such as at the insistence of the Italians.
I understand the difficulties of the Minister if his case is that no such discussion took place and that no decision was arrived at. However, this is not the kind of story which is usually dreamed up by correspondents. Newspaper reporters usually dream up stories which are more sensational and violent than that.
I now come to the directive and the Minister's speech. It is not good enough to say that there is no intention of making such subsidies and that we need not be inconvenienced by not having them. The whole point of economic management is the ability to react to events. It is not good enough to say "As we are not yet in the situation where we may require

measures, nothing is wrong, and we have disbarred them for the future".
We seek the freedom to take the decisions required in the situation in which industry finds itself. A distinguished shipbuilder said that he approved of harmonising as long as it did not prevent Britain from taking those measures which the industry required to face its competitors. This is the kind of problem with which we were immediately faced when we entered the Common Market.
Why is this a serious matter for us? The United Kingdom depends more on shipbuilding than any other country in the Community, with the exception of Germany, which is slightly ahead of us. The point remains that although the German industry is bigger than ours, shipbuilding is of greater relevance to British wellbeing than it is to that of Germany, first because of its size in comparison with our gross national product and secondly because of the regional importance of shipbuilding to Britain. Therefore, the United Kingdom is in a more crucial position in relation to obtaining the right decisions than any of the other EEC countries.
The shipbuilder recognises that the real problem is not internal EEC competition but external competition, particularly from Japan. That is why I am alarmed when the Minister says that as we do not intend to have such subsidies we are not inconvenienced by not having them. That shipbuilder claims, rightly or wrongly, that we are virtually in a world dumping situation in relation to Japan and one or two other countries.
The Japanese shipbuilding industry now has half the world capacity. More important, the Japanese quote prices that are about 60 per cent. or 70 per cent. of the price that British shipbuilders require to quote. I do not believe that that is due merely to Japanese efficiency. Indeed, if the wage element were removed we still could not compete at that level. The reason is that various measures are used by the Japanese. Insurance is available against foreign exchange losses, the shipbuilding industry in Japan is linked closely with the steel industry, all ships built in Japanese yards until recently received Government aid. Japan hardly ever ordered abroad and it entered almost into a single form of competition by closing one entry for its overseas competitors.


It is not surprising that the Japanese have cornered such a large section of the world market, 50 per cent., which has an enormous impact on the world situation.
Japanese capacity alone is equivalent, if not more than equivalent—most people would say 50 per cent. is more than equivalent—to the likely world demand for ships over the next decade. The problem we face is that our major competitor not only has half the world capacity but that that capacity is roughly 50 per cent. above a reasonable estimate of world demand over the next 10 years. That is why we seek to free our hands if necessary for the kind of support that our industry needs.
We accept that we are now in the Common Market. Our task is to continue to pursue our objectives. I opposed entry because I believed that we should be inhibited from taking certain measures which were necessary for our country. Now that we are in the Common Market it will be less easy to take these measures, but we must pursue our objectives and try to achieve what successive Labour Party conferences felt was necessary for our country. Although my colleagues and I acquiesce in our entry to the EEC that is not to say that we are quiescent. We may be acquiescent to entry, but we are not quiescent to any failure to safeguard British interests now that we have entered. In many ways it is now even more necessary to criticise.
Formerly, we criticised the failure to safeguard our interests and tried to build a platform on which we hoped to express our reasons for refusing entry. Now, criticism has an added importance, because it is necessary to develop our position within the Common Market. Criticism, therefore, is even more vital, and I think that the right hon. Member for Knutsford will agree with that. I think that he will be shoulder to shoulder with us, both on the specific points we are making and on the methods that should be adopted. That is why it is important that we should decide either to approve or disapprove and not merely take note, of the motion.
What does the British shipbuilding industry face? I mentioned competition, but the real problem is failure to invest in this industry, as indeed in other British industries. We needed an Industry Act

and a National Enterprise Board because of the failure of British capitalism to invest in British capitalism. Therefore, we require public investment. Investment in Germany in shipyards per head of the population is about double the investment in British shipyards. In Japan, five times as much investment per head goes into shipyards than goes into British shipyards. In Sweden the proportion is about seven times as much.
We have considered this matter, and in our judgment the kind of investment that is necessary to bring us into line with our world competitors can only be large-scale capital injection. Injection on that scale can come from only the nation. That is why we have indulged in the nationalisation of the industry. We cannot inject the kind of money that is required without ensuring that the public have control.

Mr. Neville Trotter: Over-capacity is largely a result of capital investment to produce enormous numbers of very large crude carriers for which there is no demand. Fortunately, our industry has not gone down that path.

Mr. Buchan: Whatever the hon. Gentleman's analysis of the situation, that is no argument for not having the best possible form of investment for our industry. The kind of investment that we need is that which will produce efficiency within our yards. It is not a question of investment leading only to enlargement. There is a big difference between the two forms of investment. I understand the point that the hon. Gentleman is making, but I am talking in terms of efficiency, which is a different matter.
In this case we are in danger of falling foul of the directive. In Page 2 of the directive Commissioner Spinelli says:
It also wishes to stress that the information on decisions to grant aid for shipbuilding referred to in Article 2 and the information on investment aid mentioned in Article 4 will be examined periodically by the Commission in collaboration with experts from the Member States so that joint guidelines for the sector in question can be drawn up.
Article 4 relates to investment. If there is a need for large-scale investment we have to notify that investment programme in advance to the EEC. Members of the EEC can decide whether they wish


to draw up common guidelines. It there are common guidelines they will, by their very definition, relate to the other Eight. Therefore, our decision to go ahead with nationalisation is immediately put into question. The two matters are linked in that way.
Hence the reason for anxiety about the directive and our reason for saying that we decline to approve or take note of the directive till we get certain matters clarified. We want clarification of the things that we see as necessary for the future survival of the British shipbuilding industry. Secondly, the guidelines that our Minister takes to Brussels should be those approved by the House and not those merely taken note of by the House.

Mr. Deputy Speaker: I remind the House that the motion lapses at 4.43 p.m.

4.13 p.m.

Mr. Neville Trotter: I believe that we should welcome this directive. It establishes ground rules for the European shipbuilding industry. I believe that it will act to the benefit of the British industry. It is a considerable improvement on the original draft and I believe that it now meets the main objections put forward by the British industry. I see it as being a modest start to what is required to tackle the enormous problems which have already been outlined this afternoon.
The future of the industry is, of course, of particular concern to us in the North-East. The hon. Member for Wallsend (Mr. Garrett), who unfortunately cannot be present because of a long-standing constituency engagement, has particularly asked me to express his concern about the future of the industry. I am sure that we both welcome the assurance of the Minister that regional aid will not be affected as a result of the directive.
The Booz-Allen Report, based on the assumption of a reasonable expansion in world demand for shipping, came to the conclusion that by 1975 there would be a surplus of building capicity of 100 per cent. over demand. In fact, we have seen a world recession and the collapse of the tanker market, and that assumption is accurate and the over-capacity must now be well over double and perhaps three times the level of demand.
I suggest that there is need for a more positive European policy for shipbuilding. The directive should be seen as only the first step towards the emergence in the near future of definite decisions as to the direction to be taken for the future of the industry in Europe. It is not just a question of protecting the industry but rather of ensuring its survival against unfair competition coming from elsewhere. We in Europe must band together and face the challenge from Japan and the emerging countries. Time is not on our side. We have reasonable order books up to 1976, but after then the situation is gloomy indeed.
Industry in Great Britain suffers not only from world conditions but from the uncertainty caused by the threat of nationalisation hanging over the industry. I am sure that all hon. Members on this side of the House feel it unfortunate that the Government's main concern for the industry at present is aimed at changing its ownership. That attitude is at best irrelevant and in practice most damaging. I urge the Government to face the hard facts in the industry as a result of world-wide over-production. The President of the Shipbuilding and Repairers National Association said only recently that time was not on our side. That is most definitely true.
I ask the Minister for an assurance that the Government will not rest on this directive but will go back to Brussels and fight hard for a further more positive directive in the near future. That directive should set out European policy and should lead to our nations working to-together to face the challenge that is before us all—in the short term to ensure the survival of the industry, and in the long term to secure the efficient expansion which we all seek.

4.18 p.m.

Dr. J. Dickson Mabon: I hope that my hon. Friends will not oppose the take-note motion. The directive is important. A number of excellent points have been made in this debate and I hope that the questions put by the hon. Member for Cheadle (Mr. Normanton) will be answered by the Minister.
We are all concerned about the 2 per cent. shipbuilders' relief arising from the Finance Act 1966. The major matter is


that the present directive is a better document than that which was published in draft in Ocotber 1973 largely because of the British Government's insistence that support for the British shipbuilding industry must be realistic and seen as a whole. The shipbuilding unions have not been over-active so far as I am aware in making clear their attitude on these directives. If this directive were turned down, our Briitsh ship owners' credit scheme would be in danger. I know that my hon. Friends would not wish that to be the case at the present critical time. They really must not oppose the directive.
I do not accept the argument advanced by my hon. Friend the Member for Renfrewshire, West (Mr. Buchan) that there is any nationalisation bogy in the directive—that is to say, that the directive is against any form of public ownership. It is not. Any reference to the Italians is a reference not to the "nationalisation" of their industry but to "rationalisation". That, if anything, is a misprint which perhaps the Scotsman and The Times have misjudged in their assessment. I do not think that the directive has anything to do with public ownership or with inhibiting its application to the shipbuilding industry. However, this third directive presupposes the existence of a fourth directive. It is by no means the last word and cannot be.
The third directive in its preamble describes a situation which although true last year is not true now. I hope that it will be a springboard for a fourth directive which in turn will be based on the proposition that we are no longer discussing the essence of competition in the Common Market but must recognise that the Common Market is one economic unit competing in the world.
My hon. Friend the Member for Renfrewshire, West referred to the active and well-organised effort by Japan to remain the shipbuilding nation of the world. References have been made to agreements with the OECD but I doubt whether they are fully respected. Certainly Japan has made the most extraordinary progress since the end of the Second World War. Despite all their difficulties, the Japanese are still managing to maintain the pre-eminence of their position in world shipbuilding.
My hon. Friend has said, as so often before Ministers with responsibility for

the shipbuilding industry have done, that there are no direct subsidies to shipbuilding in Japan. If that is the position, they have developed one of the best indirect ways of going about it that any country has devised.
In the Financial Times of 1st July 1975, an article by Peter Duminy from Tokyo stated:
The Japanese Ministry of Transport wants $950 million to be earmarked to fund the shipbuilding industry's deferred payments next year, an increase of $620 million compared with funds expected to be available from the Export-Import Bank in 74–75.
I am in favour of competition, but not of unfair competition or of our having all the rules and trying to stick to them with others doing the cheating. That is quite wrong. Even if the Japanese were the best shipbuilders in the world, and the Europeans the worst—which is not true—it would be strategic nonsense for the Common Market to cease building ships and to rely on other nations to build ships for Community trade. After all, the Common Market generates the largest sector of world trade. I cannot remember the precise figure but it represents far more than the United States or the Soviet Union. It would be madness for us not to build our ships. I repeat that I do not accept that we Europeans are the worst shipbuilders.
Unfortunately, the British disease of knocking each other and of constantly parading all our defects and never mentioning all our successes affects shipbuilding more than any other industry. We have half a dozen, or maybe more, first-class shipbuilding yards in the private sector in this country. We have other good yards in the public sector which could also be enterprising and successful. It is high time that we began to build up on what we can do in Great Britain.
My plea is that when the Minister goes to discuss this matter and the future of later directives they should concentrate on what Europe should do for its own shipbuilding yards about its strategy for aid, grants and development, whether direct through shipbuilding or indirect through the regional fund, the research unit or anything else. They should be directed to the proposition that Europe must have a shipbuilding industry and be a large shipping power.
I should like to refer to a speech made by Commissioner Spinelli, not the one quoted by the hon. Member for Cheadle, but the one mentioned in the Financial Times on 30th June 1975, at the beginning of this week in Brussels. Commissioner Spinelli laid out his three propositions for a new industrial policy. He said that the new industrial policy would recognise
that in major industrial sectors that are vulnerable to over-capacity new investment plans should be notified in advance to Brussels, in the same way that investments in the coal and steel industries have to be notified under the European Coal and Steel Community.
He specifically mentioned those sectors in which he was interested—namely shipbuilding, artificial fibres and glass.
I am not an authority on the latter two, but I do know about the shipbuilding industry. It is high time that within the Common Market we had a new shipbuilding policy looked at through European eyes. I have no doubt that with this directive and a directive to follow of that complexion, we could have a most successful shipbuilding industry, not only in the other eight fellow member countries of Europe but in countries outside the Community. Great Britain must try to get back the preeminence that it once had in this great industry.

4.24 p.m.

Mr. James Kilfedder: I represent a constituency in Northern Ireland. The Belfast shipyard is the largest single industrial company in the Province, and I am concerned about its future as a result of this directive.
This matter is important because, as has been pointed out, it is the first debate that we have had on the directive since we entered the Common Market after the referendum. Secondly, it is important because, as the hon. Member for Cheadle (Mr. Normanton) pointed out, the shipbuilding industry is in a catastrophic state. I believe that money is needed to help, perhaps even save, the Govan shipyard. Will the directive prevent money from being granted for that purpose? I should like an absolute assurance on that point.
About 6,000 people are employed in the Belfast shipyard, and I would hate to think that their future is to be dealt with in the manner described by the hon.

Member for Cheadle (Mr. Normanton). I fear that the article in the Economist of 21st June indicates what the Common Market has in mind for the Belfast shipyard and others in the United Kingdom. The article concluded:
In the early autumn, after completing a hard look at French and German State aids, the competition office plans to start an investigation into British State aids. In the renegotiations, Britain's regional employment premium, loathed in Brussels as a continuing subsidy of industry's production costs, was allowed to go on until 1977. But the Commission is unlikely to agree to another stay of execution…The most frequently cited example is Harland and Wolff, the Belfast shipyard. Its trading loss last year was £15 million on a turnover of £40 million, but Government handouts are keeping it afloat.
The Belfast shipyard received a total of £13 million in loans in 1974 an d1975 and £6 million in grants between 1973 and 1975. Can the Minister assure us that if the Belfast shipyard needs money, it will be forthcoming?
The United Kingdom depends on its shipbuilding industry more than does any other Common Market country and we ought to be very concerned about unfair competition from nations outside the EEC including, for example, Japan. I wonder how Italy will fare? Together with France and the Irish Republic, it will get benefits only until 1977.
I understand that, overseas, the shipbuilders' relief is not regarded as a subsidy because it is a rebate of indirect taxes. But shipbuilders all over the world are allowed some rebate on indirect taxes to help them. Shipbuilders in the United Kingdom are not treated more fairly than those in other countries. In Japan, they get all sorts of aid. Is the 2 per cent. relief likely to be reduced? Does that percentage correspond in value to the burden of these taxes?
I am concerned about this directive. Money has been going to the Blefast shipyard to help pay off fixed-price contracts.
Although it is right that much money should have been put into the shipyard, it has been at the expense of other services in Northern Ireland. The Minister has said that the directive will not prevent aid to development areas. I hope he can give us an assurance that the Belfast shipyard will not suffer and that not a single job will be put in jeopardy.

4.30 p.m.

Mr. John Davies: I shall be very brief. It is something of a feat to come within just a whisker of going into the Lobby with the right hon. Member for Battersea, North (Mr. Jay) and the hon. Members for Renfrewshire, West (Mr. Buchan) and Newham, South, (Mr. Spearing). I am grateful for Mr. Speaker's foresight in not accepting the amendment and therefore not putting me in that embarrassing position.
I have a strong objection to the acceptance of the directive as it stands. I object equally to the attitude of mind of the Government as expressed by the Under-Secretary. He said that this was just a take-note motion but that the Government had approved it, and I noted that he said that they had virtually reached agreement with their partners as to the content of the instrument. If that is so, I wonder what on earth is the good of their coming to the House to debate it.
I therefore strongly object to this form of debate and to the way in which the directive has been put to us this afternoon. The instrument itself worries me in this respect: I believe that it reveals a dangerous degree of complacency on the part both of the Community and of the Government. A great deal has already been said this afternoon about the extreme gravity of the situation that faces the industry. It is not just a question of competitiveness. It is a question of survival which now faces the industry. To try, therefore, to get us to accept an instrument which I believe has only one real advantage for us, in that it allows us to maintain certain other facilities to the yards, is unreasonable. We all know that the clock is stopped, that arrangements are found to hold over situations in the Community so that things which are beneficial are not arbitrarily destroyed. It is not necessary to go through all this paraphernalia in order to do so.
The directive portrays an atmosphere in the shipbuilding industry which is totally at variance with reality. It is all very well for the Government to say that they are not precluded from putting proposals for further aids to the Community and that they would do so. How does the Under-Secretary reconcile that with a preamble which says,
Whereas the continued application of aids to operations has a conservatory effect which

was justifiable in the past but which is not of a nature to improve significantly or in the long term the competitiveness of the Community shipbuilding industry; whereas, however, such aids must be eliminated gradually so that the shipyards may adapt to the new conditions; whereas aids to shipbuilding should not however adversely affect trading conditions to an extent contrary to the common interest…
How can he maintain that he can go to the Community and ask for something new having put his name to a document like that?
In view of the problems that this industry will face over the next few years, in view of the immense importance for the Community to face up to the need of ensuring the survival of the shipbuilding industry, which despite these cycles has a great future to fulfil, and on which point I wholly agree with the hon. Member for Greenock and Port Glasgow (Dr. Mabon), this directive is valueless. It is quite unnecessary for preserving the rights and provisions which we already possess and it give a character to the attitude of mind to the industry which is singularly at variance with the realities of the case.

4.34 p.m.

Mr. Kaufman: I apologise for having to cut the debate short, but I think the House would take it amiss if I failed to reply to the points which have been raised.
I say to my right hon. and hon. Friends that I fully accept the critical tone in which they have spoken during the debate. I would not wish otherwise than that we should have a debate of this kind on an EEC directive. My hon. Friend the Member for Renfrewshire, West (Mr. Buchan), absolutely fairly, said that following the referendum those who were opposed to remaining in the Community acquiesced and accepted acquiescence, but there did not follow quiescence, and that is right. I trust that debates on EEC directives, whatever their basis, will continue to be debates in which hon. Members do not pull their punches. But I cannot say the same for the contribution of the right hon. Member for Knutsford (Mr. Davies). It is all very well for him to deliver speeches of asperity of that nature when we are involved in a situation of which he was one of the principal architects.

Mr. John Davies: Certainly not of this situation.

Mr. Kaufman: For my hon. Friends who seek to be the guardians of this House, partly because of the attitudes they adopted before the referendum, is one thing. For a former Minister for Europe to complain of the way in which we now proceed is another. While I fully accept the criticisms of my hon. Friends, I cannot accept the criticism of the right hon. Gentleman.
The hon. Member for Cheadle (Mr. Normanton) put a number of questions and took up the complaints, which were also put with a great deal of validity by other hon. Members, about the form in which the motion had come before the House and the question of which motions should come before us when we are considering matters of this kind. He asked how we could involve the House at a formative stage. I agree with him that that is an exceptionally serious point. The present arrangements for parliamentary scrutiny for EEC proposals allow for the views of the House to be taken into account at the negotiating stage, but I think that the House would not be satisfied if that situation were to continue simply as it is.
Therefore, it is important that the House should note the statement made by my right hon. Friend the Prime Minister after the referendum that it would be expected that we should develop the scrutiny arrangements to make them more effective. He added:
I trust that there will be an early debate on the recent Report of the Procedure Committee on European secondary legislation."—[Official Report, 9th June 1975; Vol. 893, c. 36–37.]
That report was referred to by my hon. Friend the Member for Newham, South (Mr. Spearing) in his point of order at the beginning of the debate. What he said will add extra emphasis to what my right hon. Friend said last month.
The hon. Member for Cheadle also asked that in trying to find solutions to the problems, whether of shipbuilding or of other industries, we should always proceed on a Community basis. He contended that it was best to try to solve them on such a basis. My reply is that it depends on the problems. It is true that now that the people of Britain have voted for us to remain in the Common Market, and that it is an established fact that we are and shall continue to be

members of the Community, we should make the best of the machinery of the Community that is available to us and the partnership into which we have bee slotted, and which the British people edorsed a month ago. But it is equally true that it is best to approach other matters on a national basis.
For example, it is strongly held on the Labour benches—the hon. Member for Tynemouth (Mr. Trotter) might disagree—that there can be no satisfactory future for the British ship-building industry outside public ownership. We believe that the nationalisation measure that we shall be introducing early in the next Session is an extremely important part of the solution of the problems of the shipbuilding industry. That is not a Community policy. It is a United Kingdom policy which is fully compatible with Community membership, as we have established.
The hon. Gentleman also asked when the directive, if approved, would come into effect. It is to be considered by the Council of Ministers on 10th July, and, if adopted, it is expected to come into effect immediately.
The hon. Member for Cheadle also asked what takes place during the interregnum. The Commission has said that during the interregnum, which is in any case a short period, it would not raise any difficulties. To my hon. Friend the Member for Renfrewshire, West I would reply that notification of investment applies only to projects of over 5 million units of account receiving State aid, and investment by the Government as an owner is not affected.
My hon. Friend the Member for Greenock and Port Glasgow (Dr. Mabon) asked during my opening remarks and during his own speech what the position was about Japan. Japan is bound by the OECD General Arrangement and the Understanding on Export Credits for Ships.
The hon. Member for Down, North (Mr. Kilfedder) was understandably concerned about two matters. The first was the position of Harland and Wolff in Northern Ireland. The Government have announced their intention to bring Harland and Wolff into full public ownership. This is allowed under the Treaty of Rome and there is nothing in


the draft directive to prevent investment by Governments in publicly-owned companies. The Commission is aware of the Government's plans and has made no objection. I say to the hon. Member for Down, North that the best way in which he can safeguard Harland and Wolff and the jobs in that company—he asked that not a single job be lost in that company—is by coming into the Lobby with the Government when we have the Second Reading debate on the shipbuilding nationalisation Bill early next Session. I trust that we shall see him with us in the Lobby to safeguard jobs in Northern Ireland. I know that he does not have these odd ideological views. He is something of a populist. Therefore, I am sure that he will vote with us in favour of nationalisation.

Mr. Kilfedder: What is the position about Govan?

Mr. Kaufman: The situation, as I attempted to explain in my opening remarks, is that our aids to shipbuilding under the Industry Act are not specifically shipbuilding aids—they are regional aids. As they are regional aids, they are not ruled out by this directive. We are able to continue with regional aids for shipbuilding as regional aids rather than as shipbuilding aids—

It being one and a half hours after the commencement of proceedings on the motion, proceedings thereupon lapsed, pursuant to Order this day.

Mr. Buchan: On a point of order, Mr. Deputy Speaker. I started the debate on a point of order, so may I complete it on a point of order? What has happened? We have had a discussion. The Minister has talked it out. Does this mean that the motion lapses and that we have not taken note? Could the position be defined for us?

Mr. Deputy Speaker (Mr. Oscar Murton): The motion lapses under the Order of the House.

Mr. Jay: Further to that point of order, Mr. Deputy Speaker. Is it not profoundly unsatisfactory that in a debate of this kind the House does not have an opportunity of giving its view at all? Surely on a motion to take note—

Mr. Deputy Speaker: This is not a question for the Chair.

Mr. Dennis Skinner: Mr. Dennis Skinner (Bolsover)
 rose—

Mr. Deputy Speaker: Order. I am referring to the point of order raised by the right hon. Member for Battersea, North (Mr. Jay). At the commencement of public business a Notice of Motion was put to the House and agreed to. That is the operative motion upon which the present motion has now lapsed at the end of one and a half hours.

Mr. Skinner: Further to that point of order, Mr. Deputy Speaker. Is not this the truth of the matter? Notwithstanding the fact that these documents have been out-distanced by other events taking place within the Common Market, the Council of Ministers and the Commission, the Government, albeit with lack of support from the Conservative Party, only a few weeks after the referendum, have been unable, at a quarter to five on a Friday, to muster sufficient votes in the House of Commons to take note of this document. This is an indictment of the fact that all those hon. Members who are so keen on Common Market ideas have not been able to present themselves in this Chamber to give the Government sufficient support.
The fact is that, had a vote been taken, the Government know, as do the Opposition who dragged us into Europe, that those of us who are opposed to the Common Market would have carried the day. That is why this motion has been talked out by the Minister.

Mr. Deputy Speaker: Order. That is not a matter for the Chair. The motion lapses after one and a half hours, as provided in the business motion moved at the commencement of public business.

Orders of the Day — ADJOURNMENT

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Pavitt.]

Orders of the Day — HOSPITAL (EAST SURREY)

4.46 p.m.

Mr. George Gardiner: This debate is about the urgent need for a new general hospital at Redhill to serve the East Surrey Health District, which has Reigate and Redhill as its centre and extends west to Dorking, east to Cater-ham and south to Horley—all points outside my constituency. I wish to draw


attention to the dangerous state of some of the medical services provided in this district and to the utterly inadequate provision for possible major accidents at Gatwick Airport or on the M23 and M25 motorways. Finally I wish to ask the Minister when and by what means he hopes to remedy this situation.
The basic case for a new district general hospital was accepted 15 years ago. Building was due to start in 1968. Successive difficulties put the starting date back to 1977. Now there is no sign of a start even then. The result is that the district is served by a general hospital at Redhill which is woefully inadequate, while staff and facilities are scattered over and shared between a number of smaller hospitals several miles apart.
Consultants spend much of their time dashing from one hospital to another, with no certainty that they will end up where they are most needed. Meanwhile, in expectation of a new district general hospital, little other improvement work has been undertaken, with the result that in several cases facilities have fallen well below the standard which the medical staff responsible consider to be safe. It is no exaggeration to say that in East Surrey we have now reached the point at which lives are in danger.
In stating this I am saying nothing the Minister should not know already. He was sent a copy of the report prepared by the district management team for the Surrey Area Health Authority last November which warned of the real danger of breakdown in the medical and surgical services provided in East Surrey.
Since then the Minister and the Under-Secretary will know that the doctors running three separate services—obstetrics and gynaecology, psycho-geriatrics and the accident service—have given notice to the Medical Defence Union, the Medical Protection Society and the area health authority that these services have fallen into such disrepair that they can no longer accept legal responsibility for them.
Let me give a few examples. The management team's report last November said that the standard of care in obstetrics and gynaecology had reached
danger levels, with an imminent possibility of total breakdown of services at Dorking and East Surrey Hospitals".

The Royal College of Obstetricians and Gynaecologists has reported adversely on conditions. The consultant for the Dorking, Crawley and Horsham units wrote to the regional medical officer on 9th June stating that the service at Dorking was
grossly substandard and dangerous. It is only a matter of time before a mother looses her life because of lack of medical staff cover.
Dorking is outside my constituency, although I live in the town. I know that my hon. Friend the Member for Dorking (Sir G. Sinclair) has been deeply concerned about this matter. I mention it because the situation there bears directly on the case for a new Redhill hospital.
If a mother in labour in Dorking suffers some obstetric emergency and needs an anaesthetist, the only one available may be in an operating theatre in Crawley, 18 miles away. The obstetrician may be at a clinic in Horsham, Crawley or Redhill, 10 miles away. The registrar is at Redhill. If a new-born child in difficulty needs a paediatrician, the nearest is 10 miles away too.
This is the kind of lethal situation produced by spreading specialists over a number of hospitals so far apart. It is the result of the years of waiting for a new district general hospital. It can be corrected properly only by the provision of that hospital.
In regard to the surgical situation, surgeons spend much of their time dashing between Smallfields Hospital, where "cold" surgery is undertaken, to Redhill General eight miles away for emergency cases. At Redhill General there are two full operating theatres, on different floors and linked by a non-sterile lift and public stone steps. Work on a further theatre will start shortly but will not solve the problem. According to the management team report,
the operating theatres at Redhill General Hospital and the East Surrey Hospital are described by the surgeons using them as grossly sub-standard, and the provision of theatre facilities in general as dangerously low.
Redhill General also houses the district's blood bank and chemical pathology laboratories. They are cramped to the point at which efficiency must start to suffer. In the chemical store, of which I have pictures taken by the Sunday Miror, one has to climb over chemicals on the floor to reach those on the shelves.


On a recent visit I found stores piled to the ceiling in the gents' lavatory. The fire risk is frightening.
All this causes deep anxiety to my constituents—hospital staff, patients and potential patients. There are just too many points of stress, too many services near to breakdown.
But there is a wider, national aspect to this too, which must cause the Minister and the Under-Secretary deep concern. For the present, Redhill General Hospital, whose woefully inadequate facilities I have just described, is supposed to provide the major accident service for Gatwick Airport, as well as for the M23 motorway and the soon-to-open M25. The horrifying truth is that there is no adequate hospital provision for a possible disaster at Britain's second largest airport, which last year handled more than 5 million passengers and which is planned to handle three times that number in the next decade.
When I asked about this "Gatwick Gap" on 16th June, the Minister of State replied that he had no doubt that the response of the hospital services to any such disaster would be effective. I must tell him and the Under-Secretary that his bland assurance brought angry responses from almost everyone connected with the medical services in Redhill and East Surrey.
The management team reported in November that Redhill's major accident centre could not cope with more than a handful of serious injuries and that lives would be at risk. On 17th April Dr. Ivan Clout, a member of the South-West Thames Regional Authority, reported to that authority that East Surrey district was incapable of dealing with a major accident except one of very limited proportion.
I have a letter dated 16th May signed by the casualty surgeon at Redhill, members of the Surrey and West Sussex Health Authorities and by Mr. Adam Thompson, Chairman of British Caledonian Airways, warning that they would be unable to cope with a serious disaster at Gatwick unless the majority of those involved arrived at the hospital either dead or only slightly injured.
The Surrey Area Health Authority was sufficiently worried to organise a special seminar only last week on major acci-

dent procedures for Gatwick and the M23. Its report to the regional authority states:
Unlike Heathrow, Gatwick is isolated in hospital terms, and additional ambulance support is not so quickly available.…The availability of ambulances and manpower would dictate that casualties from Gatwick could only be taken to the nearest designated hospital.
It went on to express its grave concern at the situation. So what would happen if an aeroplane crash at Gatwick produced 20 or 30 serious injuries—a pretty modest estimate given the number of passengers on aeroplanes these days?
The nearest hospital, at Crawley, has operating theatres but no major accident provision. Blood samples would have to be driven to Redhill, nearly 10 miles away, and matched blood ferried back. At Redhill major accident unit itself, the injured would immediately encounter two bottlenecks—in X-ray facilities and in the two proper operating theatres. Further hospitals—at Guildford or Croydon—are a long ambulance drive away along very congested roads.
There is also a physical limit to the type of casualty that could be dealt with at Redhill. For example, the surgeons could deal with abdominal injuries and with fractures, but would have great difficulty in dealing with both in the same patient, as the two theatres are not twinned but are on different floors, with a non-sterile area between. If eye injuries were also involved, the patient would have to be transferred to the East Surrey Hospital a mile away, then possibly back again.
In fact this major accident unit was put to the test in February this year following a coach crash at Ockley, from which 48 people were brought to the hospital. The unit was stretched to its limit but was able to cope—because only two of the injured needed surgery. Yet this is the unit serving Britain's second largest airport—a unit that could not with certainty cope with more than a couple of surgical cases. This is a national scandal. For the safety of millions of future passengers through Gatwick, as well as for the 200,000 people in East Surrey, it is essential that work should start as soon as possible on our long-promised hospital. I appeal to the Minister to acknowledge this before a major disaster overtakes us all. This plea is backed up with telegrams from all our local councils.
Therefore, I ask the Minister what hope he can offer in this distressing situation. When I asked the Minister of State on 20th June when the regional authority expected to complete its plans for the new hospital, he replied that planning was at a very early stage. With respect, this is not true. A plan has already been agreed by the Surrey Health Authority, backed by the district management team—for what is called a best buy mark II. This has already been designed and built elsewhere. A flat site, owned by the National Health Service and already surveyed, is waiting at the Royal Earlswood Hospital. Any review of other options by the regional authority's architects is just to fill in time.
Of course I readily acknowledge that the Minister has no capital funds available at this moment. There is no dispute about that, though one must note that two such hospitals could be built each year with the money to be lost by abolishing pay beds. However, what we need in East Surrey is to break out from this vicious circle in which the regional authority says that it cannot proceed because there is no money, and the Ministry says that planning is at too early a stage. The site is there; the plans are there. I urge the Minister to accept them and put this hospital to the very top of the queue for future capital expenditure as a matter of regional and national necessity. When the money is forthcoming, we must be ready to go.
Finally, may I say that in the East Surrey district we have first-class doctors, nurses and local administrators. I benefited from their care for a month in Dorking Hospital recently. But there must come a point in such adverse conditions when their morale begins to crumble. I appeal to the Minister, in his reply today, to offer them and us some hope.

4.59 p.m.

Sir Geoffrey Howe: I do not wish to take more than one or two moments of the time available for this short debate. It has been the right and the duty of my hon. Friend the Member for Reigate (Mr. Gardiner), as the Member for Reigate and Banstead, in which the hospital is situated, to raise this important issue in the House.
Although I speak from the Front Bench, I do so not as such but as the Member for East Surrey, because my constituents are also served by this hospital and are equally concerned about the conditions now prevailing.
As the Under-Secretary knows, all the representative bodies have expressed their concern about this situation. The case put by my hon. Friend is fully supported by the Tandridge District Council, which covers my own constituency. The council has expressed to me its deep concern about the present situation and wishes it to be known that it fully supports what my hon. Friend has said today.
Of course, I understand—if I may say so, who better?—the nature and gravity of the economic crisis and the need for economy of public spending. Quite rightly, not all cuts should be borne by the capital sector. In some ways, it is already depressed. It could be helped to some extent if the Government had the courage to resist unjustifiable expenditure in other directions. In any case, we have an assurance in the letter from the Minister of State dated 30th April 1975 that
the health capital programme does enable a start to be made on those schemes which authorities consider to be the most urgent.
On that basis, this project deserves the highest priority. I cannot begin to judge beyond that, but I hope that the regional authorities and the Under-Secretary and Secretary of State will accept that case.
There is a need for a higher degree of apparent candour on the part of Ministers dealing with this matter. It does not do them or the structure of government any good when the local newspapers are able to comment, justifiably, on the answer given by the Minister of State, apparently expressing total satisfaction with the potential effectiveness of the accident services. That answer does appear to suggest
remarkable apathy…at the highest level.
I do not imagine that either the Ministers or those advising them are as inert, apathetic or inhumane as the answer given might suggest. However, I hope that the Government will acknowledge the reality of the anxiety felt by our constituents, acknowledge the need to do


something about the problem, and recognise the legitimacy of the fear that disasters can overtake this kind of situation if the response is not as energetic as it should be.
I had the unhappy privilege of conducting the Ely Hospital Inquiry and have been involved in other hospital and non-hospital disaster inquiries. There is a disturbing similarity about the ritualistic exchange of correspondence in this case and that in some cases with which I have been concerned. In some way, the system has not yet produced a way of delivering satisfaction. It must be as frustrating for the administrators as it is for the Ministers who preside over it, for doctors and others who work within it, as it is for the people who are served by it. I hope that the Under-Secretary wil acknowledge the reality of the feelings about the matter. We hope that he will be able to break out of the snare in which the system seems to have confined his predecessors.

5.3 p.m.

The Under-Secretary of State for Health and Social Security (Mr. Michael Meacher): First, I congratulate the hon. Member for Reigate (Mr. Gardiner) on the lucid and forceful manner in which he drew the health needs of his constituents to the attention of the House. The situation which he outlined is serious, and the certain fact that the deficiency in numbers and scattering of hospital beds which he describes is paralleled or even exceeded in other parts of the country does nothing to make potential patients, their relatives and friends, the doctors, nurses, technical and administrative staff working in this district—nor myself or fellow Members of Parliament—any happier.
It has been the unfortunate experience of what is now the East Surrey health district that the constraints of finance and difficult decisions about priorities and design which have followed rapidly on one another over the period of 15 years, to which the hon. Gentleman drew attention, have caused the deferment of plans for a definite start at this hospital from year to year.
However, the situation is now that even if money were available this year—which, I have to stress, it is not—the foundation stones of this hospital on the site which I know is available for it

could not be laid for the next two years. This is partly for financial reasons and partly because the area and regional teams of officers, and the authorities for which they work, have not yet decided the design of the hospital. I know that the hon. Gentleman referred to "best buy mark II". I shall say more about that later.
There is no doubt that in their discussion of design which is now taking place they will be taking into account the considerable and undoubtedly valuable thinking which has already gone on about design over the past few years. Nor is there any doubt that all who are concerned agree that a new hospital is required. The problem, as the hon. Gentleman so rightly said, is purely one of timing.
I am aware of the original intention several years ago to have some kind of "harness" building. A phase 1 functional content was produced, but before long events overtook the plan and, because of capital restrictions, the regional hospital board asked the project team to rephase to meet lower costs. The Department had a priority for "harness" projects, but the design for Redhill was fourth in that list. Much of the work done on the first three would have been used for Redhill and other design tests would have been undertaken there, but the capital cut in 1972 prejudiced the "harness" solution, and it was that more than anything else which prevented the start.
A more recent recommendation, made as the result of deliberations with the South-West Thames Region, which had experience of the district general hospital opened by my right hon. Friend last April, was some application, as the hon. Gentleman rightly said, of the "best buy" principle. Both the Department and the region are now looking at the possibility of other types of development, more in line with the desperate economic situation—and I acknowledge that fully—with which we are currently faced.
I understand that a phased "best buy" solution to the design problem could mean that a start on building the first phase might be possible in about 18 months, although I emphasise that a decision to use such a design has not yet been made. I understand that the


area and the region are due to meet later this month and that they will discuss this matter as a priority item on the agenda.
No one can doubt the real need for new development in this district, and I appreciate the particular difficulties in a district which suffered in some measure from reorganisation owing to the splitting up of some hospitals which were in the former Redhill and Netherne Hospital Management Committee Group, into what is now the West Sussex Area Health Authority. I might mention the deficiencies in the neighbouring Cuckfield and Crawley district, which I understand is desperate for a new hospital.
I am aware that it is in the provision of a new district general hospital, as such, with the attendant benefits of acute services being gathered together on one site so that communication, cross-referral and economy can be achieved—the hon. Gentleman referred to the lack of these advantages at present and the problems that arise—that this district falls down most severely.
The separation of related specialities, in some cases by many miles, contributes to the difficulties. We have no illusions about these, nor about our desire to see that they are remedied within the shortest possible time. In the meantime, however, I have no alternative but to say that the East Surrey district and the Surrey area will have to continue what they have so admirably started—I say that sincerely—namely, a rationalisation which will ensure that the best possible use is made of existing buildings and manpower, with the minimum disruption to patients and staff that can be achieved within the undoubtedly considerable constraints.
I turn to the specific deficiencies cited by the hon. Gentleman. First and foremost are the accident and emergency services—to which the hon. Gentleman and his right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) rightly referred—in any discussion of the specific problems. These have caused considerable concern in the area, owing partly to Redhill's problems, partly to the increased load which is thought likely to result from the siting of Gatwick

Airport in relation to this district and the forthcoming opening of the M25.
On these points there have been some misunderstandings, and I should like to take this opportunity to try to correct them. The major accident plan to which the regional authority has agreed accepts that facilities available in Redhill and neighbouring Crawley are only part of the necessary provision. In the unfortunate event of a major emergency—and one must, of course, plan for that—the ambulance service will endeavour to take patients to any one of six surrounding major units.
Crawley and Redhill would never have to go it alone. I stress that if the Surrey Ambulance Service could not cope I have no doubt that surrounding services would assist. By "surrounding services" I mean chiefly Kent, London, East Sussex and West Sussex. Perhaps I should also make it clear that the major accident plan is co-ordinated by regional health authorities in accordance with departmental policy It is for them to ensure that arrangements for dealing with major accidents are prepared by area health authorities in consultation with the district health authorities, local authorities, family practitioner committees, voluntary bodies, the Post Office, the blood transfusion service, the police and fire services and the Armed Services.
It is the responsibility of the regional authority to prepare and keep up to date a list of hospitals defined as major accident and emergency departments for possible designation in a major accident. Those listed as minor hospitals would fulfil a supporting rôle. This list is supplied to the authorities involved.
I have no reason to think that the existing plan as I have sketched it is inadequate for any disaster which can reasonably be foreseen. I do not think that that is a statement of complacency. However, my Department will encourage the regional authority to ensure that the plans for Surrey and the neighbouring authorities continue to be co-ordinated and continuously updated. The plan takes account of motorway accidents as it does of major aircraft disasters. I understand that Surrey is now reviewing its part of the major accident plan and


that the region will be discussing the resulting report with Surrey.
The hon. Gentleman also made reference to the obstetric and gynaecological services. There can be no doubt that one of the other needs is for co-ordination of these services in the district. I realise that the staff are genuinely concerned at the dangers which they feel may exist when services are provided, as they are at present, over a scattered area. All I can say is that the district management committee is examining whether centralisation is possible, even without any new building, in the year or two that must elapse before the district general hospital building start can take place.
Next, I say a brief word about the pathology services which the hon. Gentleman has also mentioned. Although it is unfortunate that the pathology service of the former Redhill Hospital Management Committee, which was working well prior to reorganisation, is now divided between the two separate districts, I have no evidence to think that this causes any difficulty which good will—which I am sure is present—cannot overcome.
Perhaps I should say a word about operating theatres, another matter to which the hon. Gentleman referred. One of Redhill's two existing theatres has recently been upgraded to a standard described by the area health authority as adequate. The second theatre suffers from design limitaton. A third theatre is to be built using some of the money especially allocated by the Government this year for the reduction of waiting lists. It should be ready for use by the autumn of 1976. The area health authority regards the measures which have been taken over operating theatres as the best possible at present and the results as being as adequate as resources can allow. At the Department's request the authority is providing a report on working conditions in theatres.
In the absence of any assurance that the Redhill General District Hospital will be able to become a reality in the immediate future, the regional health authority's team of officers will put forward to the Department the competing priorities when it submits its capital programme for the next two years.
As I have indicated, the outlook is undoubtedly rather bleak, but some major buildings will still be going on. The region has the difficult task of sorting out the competing priorities of at least three general district hospitals. Croydon has been promised a new hospital for as long as Redhill. At Cuckfield and Crawley there is a substantial planned population increase over the next few years. All this is in face of a heavy on-going commitment to schemes which have already been started.
I recognise that I have not been able to give the hon. Gentleman the full-hearted assurance he would like to have and which I should like to give. But perhaps I could be permitted to conclude by saying that we have the utmost confidence in the hard-pressed staff of the East Surrey district. I know that they will continue working as best they can for the benfit of the patients within the resources available. The Department, my hon. Friend the Minister of State and I will do all in our power, as I am sure will the regional health authority, to see that the highest proportion of money, commensurate with the needs of the people of the rest of the region, is allocated to them. But more than that, at this stage, I cannot say.

The Question having been proposed after Four o'clock, and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at fifteen minutes past Five o'clock.